Chile, que pasa? -an update of the situation for salmon farming in Chile, - issues and potential solutions

Size: px

Start display at page:

Download "Chile, que pasa? -an update of the situation for salmon farming in Chile, - issues and potential solutions"

Martina Bradford
6 years ago
Views:

1 Chile, que pasa? -an update of the situation for salmon farming in Chile, - issues and potential solutions Intrafish / DNB investor conference London, 4 November, 2015 Jon Hindar CEO Cermaq Group

2 The starting point a significant global supplier Chile is the second largest exporter of farmed salmon after Norway - Estimated harvest volume 2015 is 819MT - 30 % of global harvest 1000 tonnes wfe E 2016E Others UK Canada Chile Norway CAGR CAGR E Norway 6 % 3 % Chile 46 % 0 % UK 5 % 2 % Canada -5 % 14 % Faroe Islands 19 % -1 % Ireland -10 % 15 % USA 3 % 2 % Australia 4 % 7 % Others 32 % 33 % Total 11 % 3 % Source: Kontali October report 2015 Source: Kontali July report 2015 Page 2

exports by country, 2014 Chilean Coho exports

3 - But reliant on a few markets Chilean Atlantic exports by country, YTD Chilean export has traditionally been directed towards only a few countries Chilean Trout exports by country, 2014 Chilean Coho exports by country, 2014 Source: ABG Sundal Collier, Kontali, FactSet Page 3

Regulations are key for industry development The farming license situation is characterized by - Location is given by license - Licenses are relatively small, and often close to each other - Only

4 Regulations are key for industry development The farming license situation is characterized by - Location is given by license - Licenses are relatively small, and often close to each other - Only out of 1300 licenses are currently in active use - License regulation is given by total volume per cycle (2years) - Historically 700 licenses have been in use Rapid biomass growth has most likely led to historical biological challenges - ISA crisis in SRS crisis in 2014 to? Growth potential is considerable if unused licenses are activated Stocking-levels per license is a regulated to be a function of sanitary performance of the previous cycle - Mortality regulates stocking levels - Caligus load regulates biomass density at cage level Page 4

Prices are historically low (as seen from Chile) Historically low prices (in USD) - Atlantics in US, Brazil and Russia - Coho and trout in Japan Weekly salmon prices, Chile Unfavourable exchange

5 Prices are historically low (as seen from Chile) Historically low prices (in USD) - Atlantics in US, Brazil and Russia - Coho and trout in Japan Weekly salmon prices, Chile Unfavourable exchange rates for Real, Rouble and JPY Chilean Atlantics have traditionally been sold at a discount in the US - Discount against Canadian and Norwegian fish increases with strong supply growth New quality standards reduce ratio of Superior Grade De-marketing effects from promotion of Antibiotic free salmon - Puts additional pressure on Chilean products, as antibiotic use is currently relatively high in Chile Source: Urner Barry s, FOB Miami Chilean D-trim avg. 3-4lb USD exchange rate development RUB & JPY BRL 140,00 4,50 120,00 4,00 100,00 3,50 80,00 3,00 60,00 2,50 40,00 2,00 20,00 1,50 Russia Rubles 1 RUB Japan Yen 1 JPY Brazil Real 1 BRL Page 5

6 Reduced cost competitiveness in Chile Over the last 10 years Chile has moved from being a cost leader to a cost laggard - Cost benchmarks in Chile indicate that Cermaq figures are representative 35,00 30,00 25,00 Cermaq s ex-cage cost for Atlantic salmon, NOK per kilo Main reasons for increased cost - Regulatory costs - Treatment cost for Caligus - Mortality from pathogens (mainly SRS) - Feed cost and feed conversion - Treatment cost for pathogens (medicated feed, vaccines) - Premature harvest of smaller fish - More expensive manpower 20,00 15,00 10,00 5,00 0,00 Chile Norway For Norway 2005 column refers to 2006 cost level Page 6

The financial situation of the industry Huge losses from operations the last 12-15 months call for additional financing Aggregated cash flow Chilean salmon farmers How will the financing needs be

7 The financial situation of the industry Huge losses from operations the last months call for additional financing Aggregated cash flow Chilean salmon farmers How will the financing needs be covered - Banks (no?) - Feed suppliers (no?) - Equity issues (perhaps?) - Reduced working capital (probably?) Capital required (industry illustration) Some companies currently investigate strategic alternatives - a sign of investor fatigue - Potentially a gap between seller and buyer expectation on transaction pricing - Recent capital injection in Multiexport gives a different signal Source: ABG Sundal Collier, Company data Page 7

8 Are there any good news on prices and price realization? Global supply/demand balance in implies strong likelihood for higher prices Upside in a better go-to-market strategy - improve logistics (supply regularity and quality) - avoid crowded competition in Miami spot market, - build more long term customer relationships Potential changes - increase in the oil-price (highly speculative) may have a positive effect on the exchange rates for Real and Ruble - improved biological situation will increase superior grade ratio and reduce harvest of smaller fish and give a better price realization - strong reduction of antibiotic usage, resulting from an effective SRS vaccine, will improve product perception and potentially increase price realization Page 8

9 Are there any good news on costs? Cermaq Chile: FCR (closed cycles) Feed cost is expected to be influenced positively as Chilean feed market will contract and create fierce competition among feed suppliers 1,80 1,60 1,40 1,20 1, (YTD Atlantics Trout September) Cermaq s results shows that careful selection of feed composition and feeding strategy gives significant improvements in growth Cermaq Chile: # sites treated with antiparasite by bath Caligus situation is currently under good control, and allows for fewer treatments - Lower treatment cost - Better growth Cermaq Chile : Caligus evolution per month (female) Page 9

10 There are good news on mortality! Mortality rates in Cermaq Chile recent months have improved significantly Further: Evaluation of new SRS vaccine(s) will be initiated in large scale by year end - Laboratory results are promising - It will take time to conclude on efficacy An effective vaccine for SRS will: - Reduce losses due to mortality on large fish - Improve feed conversion and growth - Potentially eliminate usage of Antibiotics of >90% - Reduce ratio of downgrades Page 10

11 Are there any good news on financing? Reduction of smolt stocking for all species (?) - Will reduce working capital Most companies have adequate financing - Financing already secured, or, parent companies/ main shareholders with significant financial muscle - Reduced likelihood of fire-sale or bankruptcy Unlikely that banks and feed companies will reduce financial support - mutual interest in going concerns Increased cash flow from operations resulting from outlook for increased prices, potential cost reductions, and reduced WC (lower stocking) - The current critical financial situation may ease going forward, but not eliminate a difficult financial situation for the industry as such Page 11

Do we risk to see 2010-2015 revisited? Combination of optimistic prices and potential improved biology (effective SRS vaccine?

12 Do we risk to see revisited? Combination of optimistic prices and potential improved biology (effective SRS vaccine?) could imply growth - Individual wisdom of >30 companies can yet again lead to collective lunacy - New surge in biomass growth can quickly lead to price destruction and increased biological issues Regulated growth in areas demonstrating good biological control and sustainable farming practices is a prerequisite for a sustainable development Ideally the license structure should be re-set to: - Fewer but larger licenses - Increased distances between sites - Rearrange sites to allow single companies to control larger areas - Create better visibility on growth prospects Look to Norway - learn from regulatory successes and failures Page 12

13 Chile, que pasa? Salmon farming is currently very challenging, - in terms of financial performance, competitiveness and customer perception Ironically - Chilean farming industry is the main creator of this situation, but also holds the key to unlock a huge potential for improvements Strong assistance from authorities and regulators is needed to ensure a long term sustainable development Solving the current challenges requires: - Dedication to sustainable development - Strengthened Government/regulator involvement - Willingness to spend resources on R&D, and to respect IPR - Devote resources to (re)build market perception and industry reputation Page 13

14 Cermaq has confidence in Chile Cermaq is determined to maintain an important position in Chilean salmon industry, as we have a fundamental belief that the current issues can be solved and that this industry can increase its global importance. Page 14

15 Leading sustainable aquaculture for a better tomorrow Thank you for your attention Photo: Norwegian Seafood Council/Mari Svenningsen Page 15

Results Presentation 3Q17

Multiexport Foods S.A. Results Presentation 3Q17 Santiago, November 2017 Agenda I. Highlights II. III. Financial Statements Supply, Demand and Prices IV. Farming Operation V. Perspectives 2 Highlights