Wednesday Nov 4, 4.55 p.m. G.M.T
Prepare for the worst, hope for the best
While in the short term the outlook for the salmon industry in terms of health issues is challenging, the long term view is slightly more optimistic, said Alexander Aukner, equity research analyst, DNB.
“In the long term there are lot of opportunities, although sea lice does remain challenging.”
At the moment the industry in Norway, is spending NOK 3 billion per annum on treating sea lice, and that’s just direct costs.
Aukner estimates the industry could save NOK 2-3 per kilo on costs if the sea lice problem is solved.
But he is positive about this with more than 10 non-medical treatments for sea lice “ramping up”.
System such as lasers and closed containment – “some of these technologies will have to work,” he said.
“They are all looking into the same problem from different sides – I’m confident it will be solved within the next year to year and half.”
So while short term the sea lice problem will continue to be challenging, “if you can solve one of these issues, you will have huge cost savings potential and positive knock on effect.
“Very few analysts assume decline in costs going forward.”
--Dominic Welling
------------------------------------------
Wednesday Nov 4, 4.41 p.m. G.M.T
Steady supply for a growing demand
The aquaculture industry is growing, and by 2030, the majority of seafood at a global level will come from aquaculture, according to Austevoll Seafood's Arne Mogster's estimates.
Asia, and particularly China, is consuming most of it the fishmeal and fishoil production, and the usage of it for aquaculture has significantly increased in recent years, accounting in 2014 for 72 percent of the total.
“China is as important as fishmeal and fish oil consumption, as Peru is as supplier,” he said.
With a growing demand, and a steady supply, the industry can only look for alternatives to feed farmed fish.
Fish meal and fish oil substitutes are important, but also, better raw material utilization is essential to reach objectives.
--Lola Navarro
------------------------------------------
Wednesday Nov 4, 4.15 p.m. G.M.T
Cooke is the model
Canada's Cooke Aquaculture was presented as a prime example of how aquaculture companies should be positioning themselves in terms of vertical integration from an investment perspective.
As a salmon farmer that owns its own trucks, well boats, feed plant, equipment production and having expanded across species into bass and bream in Spain, Cooke, "looking at how their market and volatility compares to their peers, then to me that is the success story," said DNB's Per Even Hauge.
-- Rachel Mutter
------------------------------------------
Wednesday Nov 4, 4.09 p.m. G.M.T
Time to consolidate
Chile will take a key role in aquaculture consolidation in the view of Per Even Hauge, director at DNB Markets.
Quoting Jon Hindar's earlier presentation, Hauge said all companies in Chile are basically up for sale and are currently trading at a 50-70 percent discount to their Norwegian peers.
"I'm surprised there aren't more players in Norway looking to enter Chile now," he said, adding that the anytime in the next 12 months presents a good entry point.
But it's not just about consolidation across salmon, with Hauge expecting to see more consolidation inter-species.
"Investors would appreciate seeing a company with more spread over species -- it would balance margins and consolidate customer bases," he said.
-- Rachel Mutter
------------------------------------------
Wednesday Nov 4, 4.04 p.m. G.M.T
Nowhere quite like Oslo for IPOs
Nowhere else quite holds the expertise you find in Oslo for public seafood company listings, said Per Even Hauge, director at DNB Markets.
"We see initiatives from all over the world ...[but] Oslo is the hub. It has a bunch of analysts who are pretty knowledgeable and a stock exchange that knows the industry, which is not the case in London or New York," said Hauge.
-- Rachel Mutter
------------------------------------------
Wednesday Nov 4, 3.53 p.m. G.M.T
Investment more appealing in service industries
The aquaculture services industry is where investors see the most appeal, according to this afternoon’s investing in seafood panel.
“Investors are not very comfortable with the biological situation, [they are] not very happy with owning the fish, but they like all the value drivers associated with it…fish health, feed, equipment,” said Per Even Hauge, director at DNB Partners.
“The fish health sector ticks a lot of boxes that other sectors don’t – it has all the value without the volatility.”
Anders Gaarud, director at EQT Partners agreed: “The industry is getting more professionalized [and] for some companies they are probably at a crossroads… especially on the service side,” he said.
-- Rachel Mutter
------------------------------------------
Wednesday Nov 4, 3.45 p.m. G.M.T
Size matters more
Size is the key when it comes to private versus public listing, said Thor Talseth, portfolio manager, Amerra Capital Management.
For example Marine Harvest obviously belongs on the stock exchange because of its size, whereas smaller companies may not.
On the other hand, some smaller companies which are struggling at some point may become attractive for private equity.
“What we need is more strong, sizeable, well managed companies to drive product development, new markets – there are very few companies in the world that can do what Marine Harvest has done with salmon,” said Talseth.
“Our role is to build platform companies who will eventually grow in companies like Marine Harvest or be acquired by companies like Marine Harvest.”
--Dominic Welling
------------------------------------------
Wednesday Nov 4, 3.41 p.m. G.M.T
Knowledge is key when investing in seafood
“If you don’t have the knowledge of the industry, if you are not comfortable with that volatility and understand the drivers behind them then it is not for you.
According to Talseth, understanding the risk factors, is the minimum level of understanding.
“Understand the drivers behind the risk factors in seafood,” he said.
--Dominic Welling
------------------------------------------
Wednesday Nov 4, 3.30 p.m. G.M.T
Ewos, Pharmaq deals not the new benchmark
Recent seafood deals involving Ewos and Cargill and Pharmaq and Zoetis cannot be considered the new benchmark for valuations for investing in seafood.
“It is just a coincidence these large deals have happened at same time,” said Thor Talseth, portfolio manager, Amerra Capital Management.
“They are made by large industry players who can take out synergies and plan ahead in a way private equity cannot,” he said.
--Dominic Welling
------------------------------------------
Wednesday Nov 4, 3.23 p.m. G.M.T
There is hope for Chilean farmers
At the moment, what the damaged Chilean industry needs is tighter regulations and a closer monitoring from the authorities, who, according to Hindar, don’t see the situation as dark as the industry does.
In addition, the sector needs funding, a bigger investment in R+D, and a strong commitment from the involved parties in the development of the sector.
A good way to start? Stop damaging the industry's image from within, he suggested, the usage of antibiotic is relatively high, but those de-marketing efforts only put additional pressure on Chilean products.
“We need not only to work together, but also to be willing to invest in logistics and R+D, and to commit to more adequate regulations.”
--Lola Navarro
------------------------------------------
Wednesday Nov 4, 1.53 p.m. G.M.T
The branding dream
"For us branding is a dream, an ambition and something that can be achieved with our back story," said Ole Eirik Leroy, chairman of the board of Marine Harvest this afternoon.
Marine Harvest has embarked upon several branding exercises, with its Mowi salmon on the Asian market and Rebel Fish in the United States, which it is using to bring new consumers to salmon.
"The most encouraging and successful thing is to go into branding," said Leroy.
-- Rachel Mutter
------------------------------------------
Wednesday Nov 4, 1.53 p.m. G.M.T
--Dominic Welling
------------------------------------------
Wednesday Nov 4, 1.23 p.m. G.M.T
Will Cermac use genetically modified fish?
“When we have been asked in if we’d use genetically modified fish, we said we didn’t see the need for that,” said Cermaq CEO, Jon Hindar.
“I think this is something that can only be justified if you see that you cannot do a good job without it.”
To give a straight answer to the question, he said: “No, I don’t see that happening in the foreseeable future,”
--Lola Navarro
------------------------------------------
Wednesday Nov 4, 1.13 p.m. G.M.T
Change of perception
Ever chosen to eat chicken in a restaurant after knowing the salmon they served was farmed?
Daniel Fairweather, director of aquaculture and fisheries at Willis has seen this situation quite a few times in the past, but trends are finally changing.
“There is an increasing awareness of health and environmental benefits of fish consumption. There is a changing perception,” he said.
Of course, much more needs to be done, the biggest concern now is the levels of antibiotics used in fish farming, and that is the industry’s main focus.
--Lola Navarro
------------------------------------------
Wednesday Nov 4, 12.24 p.m. G.M.T
It's not rocket science
Tackling risks in salmon farming is not rocket science, according to John Marshall, technical director at Benchmark Animal Health, it's about money and investing in the right technologies.
"We need to work on developing health models," said Marshall.
"It’s not rocket science it's abut having the investment to go forward, invest in these technologies and take them forward, not just this year but over the next five years and so on," he said.
--Dominic Welling
------------------------------------------
Wednesday Nov 4, 12.18 p.m. G.M.T
Storms are the largest insurable risk
The top three insurable risks in salmon farming are storms, followed by disease and then sea lice, according to Dan Fairweather, director of Aquaculture and Fisheries at Insurance company Willis Limited.
“Algal blooms are also an issue,” he said. “We see where companies are developing sites – question is have they always been there? We are not aware until put a fish farm there.”
While he couldn’t say how much disease is costing the salmon industry, Fairweather did mention that many insurers exclude diseases such as ISA from policies.
--Dominic Welling
------------------------------------------
Wednesday Nov 4, 12.10 p.m. G.M.T
The world needs more seafood
Allaska Pollock makes up for half the total production of whitefish, but in terms of value, the species is closely followed by Atlantic cod, presumably be the highest valued whitefish in 2015.
The EU consumes 47 percent of the global production of whitefish, but while Germany leads the Allaska Pollock consumption, it has very little to do with cod.
Unsurprisingly, the UK is the main consumer of cod and haddock, the favourites of the Fish and Chips industry.
But, being Norway the second largest exporter of whitefish in the world, what are the main challenges the sector faces?
Number one, prices.
Historically, cod prices have varied, with two big drops following financial crises and quota increases.
Secondly, costs control. Norwegian crew members are expensive, he said, followed by freight and packaging costs, fuel, fishing gear, maintenance, and administration.
But the industry is now on the right track, and the world, better sooner than later, will be demanding more fish on their tables.
“We need a 69 percent increase in food production in order to feed the world in 2050, and currently, less than 10 percent of food consumption is sea-based,” said Barstad.
“The world needs more seafood.”
--Lola Navarro
------------------------------------------
Wednesday Nov 4, 11.47 a.m. G.M.T
Cargill already offers feed for interesting species such as alligators, but it is tilapia, shrimp and salmon where the growth lies, said Einar Wathne, president of Cargill Aqua Nutrition.
While the acquisition by Cargill will open Ewos up to a variety of species and cultures, tilapia, salmon and shrimp made up 18 percent of the feed market in 2012 with 67 million metric tons and by 2020 this is expected to be 20 percent or 90 million metric tons.
“So it is these three where we will focus our future investments, these are the growth species and where the demand is growing.”
Additionally the company is planning new research center in Thailand, where it will work with shrimp and tilapia.
“The value creation is in shrimp and tilapia,” said Wathne. As the company has been able to reduce the inclusion of fishmeal in salmon feed now it will use the same science to reduce the inclusion in shrimp feed, he said.
“Shrimp feed still had 45 percent fishmeal –three times more than salmon – I am sure we can make shrimp feed less dependent, we have the science.”
There is also the potential application of functional feeds to manage risk of EMS in shrimp using the knowledge and library Ewos already has.
-- Dominic Welling
------------------------------------------
Wednesday Nov 4, 11.15 a.m. G.M.T
The perfect match
Cargill’s acquisition of Ewos is a “perfect match”, said Einar Wathne, the newly named president of Cargill Aqua Nutrition in a special presentation at the IntraFish Seafood Investor Forum.
Cargill’s purpose is to be the global leader in nourishing people and aquaculture is a growth area in the center of that purpose, said Wathne.
Cargill Aqua Nutrition has gained a global reach overnight following the acquisition. Ewos and Cargill are now present more than 20 countries worldwide with aquafeed.
“How many M&As would Ewos have needed to reach that point,” said Wathne.
“The combination will secure supply of ingredients for growth and we will bring novel ingredients to the market.”
-- Dominic Welling
------------------------------------------
Wednesday Nov 4, 11.05 a.m. G.M.T
Getting ahead of the game
Biological risks are a never ending problem in the aquaculture industry, but there are some musts when it comes to fight them.
Bakkaforst’s Regin Jacobsen said they are improving farming practices that are expected to reduce the risk of biological issues.
On the other hand, Jon Hindar, suggests more efforts in R+D are needed, as well as more systematic ways, and a better understanding of the biology.
But union is strength, and according to Ole-Erik Leroy, of Marine Harvest, there are two other essential elements in this fight.
First, the need of getting regulations up to speed, and last but not least, consolidation.
“The industry is too fragmented, and consolidation is the way to go towards a better control of biological issues.”
-- Lola Navarro
------------------------------------------
Wednesday Nov 4, 11.03 a.m. G.M.T
The sea lice problem
We have been fortunate in Norway, we have had very little levels of sea lice in our farms, said Jon Hindar, Cermaq CEO.
To combat the problem in Chile, though, the industry needs to use all the tools they have, and to invest a lot in technology.
It is important to treat the disease in not chemical waters, he said.
“In Chile the industry has been able to handle the crisis and bring sea lice to more acceptable levels,” he said
-- Lola Navarro
------------------------------------------
Wednesday Nov 4, 11.00 a.m. G.M.T
What keeps you up at night?
A few things by the sound of it. While Cermaq's Jon Hindar is concerned by the issuance of new operating licenses other are more bothered by biological risks which could hold the industry back.
"I am concerned about licenses to grow and even licenses to operate," said Hindar.
"I am not too concerned about getting through to consumers and create demand, but more about being able to produce and meet the demand that already exists," he said.
"The people with the power to give licenses, don't seem not convinced, so it is difficult to see how we can grow in a sustainable manner over the next few years."
For Regin Jacobsen, CEO of Bakkafrost, the biggest risk to the industry's future is biology.
Likewise, Marine Harvest's Ole-Erik Leroy said that while "we all dream about growth," the company in the past has had to cut back production in Chile, Ireland, Faroes over biological issues.
"What keeps us up at night is to get control of the biology," he said.
-- Dominic Welling
------------------------------------------
Wednesday Nov 4, 10.52 a.m. G.M.T
Salmon is enough for now
Three major salmon producers, Marine Harvest, Cermaq and Bakkafrost, are happy with salmon and have no intentions to move into other species.
For Marine Harvest, it is already in the three sectors -- feed, farming and VAP processing and distribution -- and this is where we want to continue, said Ole-Erik Leroy.
"Our preoccupation is salmon where we have big projects in all three areas, want to continue, we don’t see ourselves entering a new species big time in the next 3-5 years.
The same is for Cermaq. "There are no plans for new species, not within Cermaq," said Jon Hindar.
"We have more than enough to do with what we have already." But Mitsubishi is a different story, which already has a whole range of products.
Regin Jacobsen agreed. "Bakkafrost is committed to focus on salmon farming, where there are a lot of possibilities to grow Bakkafrost over the next few years," he said.
-- Dominic Welling
------------------------------------------
Wednesday Nov 4, 10.46 a.m. G.M.T
Fishmeal, oil alternatives need to be developed
As the world awaits Peru's decision on a second anchovy season, should the farming industry continue to risk being so reliant on these marine ingredients?
Marine Harvest, Bakkafrost and Cermaq all agree alternative proteins are needed, especially as salmon production is expected to grow.
"New sources of marine ingredients and omega 3 need to be developed," said Regin Jacobsen, CEO of Bakkafrost.
Cermaq's Jon Hindar, added this was one of the priorities of the Global Salmon Initiative (GSI) – finding replacements for omega 3 fatty acids.
The GSI has launched a tender for alternative EPA/DHA sources whereby companies will submit alternative offers that will meet the specifications of conventional feed. If successful, then GSI member are committed to buy substantial amount of that product to encourage others in the industry to also seek alternatives to fishmeal and oil.
-- Dominic Welling
------------------------------------------
Wednesday Nov 4, 10.34 a.m. G.M.T
Small consumer revolution going on
Marine Harvest's Ole-Erik Leroy said he is seeing a small revolution going on when it comes to consumer education and salmon consumption.
"Nowadays the consumer is very well informed, and has plenty of information at their fingertips – in Norway consumption is around 10 kilos per capita," he said,
"Salmon consumption is increasing, consumers are getting the message on things such as what to feed their kids, and salmon is very much winning the competition for healthier eating."
-- Dominic Welling
------------------------------------------
Wednesday Nov 4, 10.24 a.m. G.M.T
The Faroe Islands working for better practices, but maybe not fast enough
In a crisis you can make good decisions, or try to start everything all over again, Jacobsen stated.
“We made some good decisions [when the industry collapsed], we have a new regulation today, but it is difficult to comply. Even if you have responsible partners, different strategies from so many companies can cause conflict of interests.”
“I think the industry is taking more responsibility today, we are working together on best practices, but maybe it is not going fast enough.
-- Lola Navarro
------------------------------------------
Wednesday Nov 4, 10.22 a.m. G.M.T
Should value-added processing be left to third parties?
There is room for both innovative processors and salmon farmers.
“It is a tremendous opportunity to salmon farmers to take the advantage to tap into the leading part of the industry, salmon is the driving force of the seafood sector,” said Ole-Erik Leroy, Marine Harvest Chairman of the Board.
-- Lola Navarro
------------------------------------------
Wednesday Nov 4, 10.19 a.m. G.M.T
What can help the US salmon market?
Branding is not the answer, according to Marine Harvest chairman, Ole-Erik Leroy, rather a problem of inefficient systems in place.
Salmon per capita consumption in the US is declining against shrimp, so what is it going to take to grow the market?
Leroy, said the market for Atlantic salmon in the US has a fantastic potential when things are done right, but there are a lot of inefficient systems.
And branding is not the answer either, he said. "I are far from the point that branding is the solution, there is so much to do in improving logistics and supply chain, and service. This is what we need to develop, it is not about branding."
-- Lola Navarro
------------------------------------------
Wednesday Nov 4, 10.15 a.m. G.M.T
Russia ban? No problem
Marine Harvest's chairman Ole-Erik Leroy, said he was surprised by how easy it was to shift volumes to Europe following the Russian ban imposed last year..
"We surprised ourselves the easiness with we could shift these volumes to Europe," he said.
-- Lola Navarro
------------------------------------------
Wednesday Nov 4, 10.08 a.m. G.M.T
Cermaq's Jon Hindar: Easy to shift volumes
The efficiency of the salmon market means it is possible to shift volumes around fairly easily, according to Jon Hindar, CEO of Cermaq Group.
In 2014, Russia took 93,000 metric tons, and in the first nine months of this year they took 73,000.
"So it is possible to shift volumes around, we can surpass political issues, but the big potential is really China and Asia," he said.
"There is a huge growth of population and the middle class will buy as much as the whole Europe, and now they are allowed to have two babies instead of one."
-- Lola Navarro
------------------------------------------
Wednesday Nov 4, 9.52 a.m. G.M.T
Bakkafrost well positioned for growth
"The highest risk for the salmon industry is all about biological issues," said Regin Jacobsen, CEO of Bakkafrost.
"We need to manage these risks, and we think that is the clever way to grow," he said.
Nevertheless the potential for organic growth in the Faroe Islands is significant, depending on the right location and conditions, he said.
"We think we have this and the finance in place to make these investments, but it takes time," he said.
-- Dominic Welling
------------------------------------------
Wednesday Nov 4, 9.47 a.m. G.M.T
Taste of the Faroe Islands
Faroese salmon producer Bakkafrost is distinguished by its long value chain, according to its CEO Regin Jacobsen.
While every producer has a story to tell - Bakkafrost is keen to promote the "Taste of the Faroe Islands". The fact the company manages its raw materials throughout the whole chain makes its fish taste different, said Jacobsen.
"Even down to the purification of fish oil makes our fish different, taste different," he said. "The story is important, everyone has their story, for us we can document everything back to the raw material, we take responsibility for the whole value chain."
-- Dominic Welling
------------------------------------------
Wednesday Nov 4, 9.25 a.m. G.M.T
Bakkafrost costs rise on bad weather
Faroese salmon farming company Bakkafrost delivered total operating earnings before interest and taxes (EBIT) of DKK 206 million (€27.6 million/$30.3 million) in the third quarter of 2015, down 1.4 percent compared with DKK 209 million (€28 million/$30.8 million) in the third quarter last year.
However, revenues reached DKK 677 million (€90.8 million/$99.7 million) over the period, up 16 percent from DKK 584 million (€78.3 million/$86 million) in the same period a year prior.
Total volumes harvested were 12,982 metric tons gutted weight, which is an increase of 19 percent, compared with Q3 2014, the Regin Jacobsen said.
The main reasons for the lower profit came down to lower than expected prices; higher farming costs due to bad weather and lower VAP margins.
For example, the farming/VAP division decreased margin from NOK 19.73 (€2.1/$2.3) per kg in the third quarter last year to NOK 18.10 (€1.9/$2.1) per kg this year.
-- Dominic Welling
------------------------------------------
Wednesday Nov 4, 9.10 a.m. G.M.T
Invest in seafood, expert suggests
Stock markets are unpredictable, but the seafood industry’s consolidation is set to continue.
“Please, please, please, use any opportunity or windows to get financing and make sure you diversify funding in the industry,” he begged delegates.
-- Lola Navarro
------------------------------------------
Wednesday Nov 4, 9.00 a.m. G.M.T
Why is seafood the place to be?
Paal Korneliussen, publisher of IntraFish Media kicks off the IntraFish Seafood Investor Forum 2015.
Welcoming and thanking delegates, Korneliussen asked the question: Why is seafood the place to be?
"Seafood is part of the answer to many of the issues we face today, and it almost ticks all the boxes,” he told the audience. "Looking at water utilization and carbon emissions, salmon is ten times better than beef."
Population growth is a real threat, and the answer has to come from aquaculture.
Heart diseases and obesity are some of the main issues of the developed world, he said, and what is the way of battling them? All doctors would tell you: "quit smoking, eat more fish".
-- Lola Navarro
----------------------------------------------------------------------------------------
Wednesday Nov 4, 8.00 a.m. G.M.T
Seafood heavy-weights and the investment community congregate in London
Major players in the global seafood industry as well as the investment community are gathering at the Four Seasons Hotel in London, United Kingdom this Wednesday, to explore opportunities and arguments for investment in the global seafood industry.
Over the course of the day, several high-ranking executives from seafood companies and investment firms will shed some light on why now is a perfect time to invest in seafood.
Speakers and panelists include Ole-Eirik Leroy, chairman of the board at Norwegian salmon farming giant Marine Harvest, Arne Mogster, CEO of Austevoll Seafood, Einar Wathne, president of Aqua Nutrition Cargill, Thor A. Talseth, portfolio manager at AMERRA Capital Management, and many more.
IntraFish Seafood Investor Forums, held twice per year in New York City and London, have drawn the biggest names in the seafood industry and investment community.
Among the panel topics in London this year:
- What is salmon’s second act?
- Reducing aquaculture risk with innovation
- Investors speak: The case for seafood
DnB Group Executive Vice President of Large Corporates and International Harald Serck-Hanssen is keynote speaker.
Make sure you keep checking back here for rolling coverage from all the different speakers and panel discussions taking place during the day.
-- IntraFish Media
----------------------------------------------------------------------------------------
