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Marine Harvest “Is there any hope for Chile in the next two years”?
Havbrukskonferansen 24 November 2015
Perfect storm in Chile
2
Rapid growth
Biological issues
Antibiotics & reputation
Lack of smart regulations
Slow consolidation
Financing
Currency
3 Source: Kontali
0
100
200
300
400
500
600
2008 2009 2010 2011 2012 2013 2014 2015e 2016e
Thou
sand
ton
nes
GW
E
Atlantic Salmon
Rapid growth of Chilean harvest volumes…
4 Source: Sernapesca
…facilitated by unsustainable levels of antibiotics
0
100
200
300
400
500
600
2008 2009 2010 2011 2012 2013 2014
Tonn
es
Antibiotics use for industry (salmonids), tonnes
5 Source: Marine Harvest and Sernapesca
0
100
200
300
400
500
600
700
800
2008 2009 2010 2011 2012 2013 2014
Gra
ms/
tonn
e
Antibiotics use (grams/tonne), MH Chile
Antibiotics use (grams/tonne), industry (salmonids)
MH Chile not immune to biological challenges
6 Source: Marine Harvest
Profitability in Chile impacted by both low prices and higher costs (in NOK)
- 15
- 10
- 5
0
5
10
15
2008 2009 2010 2011 2012 2013 2014 2015 YTD
EBIT
/ k
g G
WE
(NO
K)
MH Chile EBIT/kg (NOK)MH Chile EBIT/kg average for periodMH Norway EBIT/kg average for period
7
Approximately 1,300 licenses issued vs ~ 600 licenses being used across production cycles. No limit on biomass
Regulations on mortality has led to farmers moving to poorer sites for the next generation
There are many other legal limits to what farmers can do and cannot do, but no real results
Today’s regulations – no real impact
8
After ISA no real change in industry structure
2014e2013
20122009
20062003
20001997
0
20
40
60
80
23
13
4 42 2
Source: Kontali Note: Numbers of players producing 80% of the farmed salmon and trout
9
Restricted financing – magic cash?
10 10
Significant USD appreciation last 5 years
-20%
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
2011 2012 2013 2014 2015
USDNOK USDBRL USDJPY USDRUB USDCLP
USDNOK USDBRL USDJPY USDRUB USDCLP
48% 127% 51% 112% 53%
Source: Bloomberg
11
Positives Tight global salmon supply Flat supply from North America Industry try to come up with suggestions to regulations Negatives Authorities resist to make real changes in regulations Industry acts to slow, and complicates solutions Opportunities Consolidation Currency Development of value added products Reduction in use of antibiotics New medicine against SRS and caligus
Chile – any hope the next two years?
12
1. Split licences from locations
2. Asses total carrying capacity in each region (all species) – current level way to high
3. Divide carrying capacity on number of licences per region and let companies determine their best locations for farming salmon within each region. Apply x number of licences (MAB's) according to environmental carrying capacity per location
4. Monitor environmental impact per location
5. Set key biological indicators
Use of antibiotics
Number of sea lice treatments
6. Set a horizon, for example 10 years, and give the industry players incentive to comply, by rewarding growth
5 percent per generation MAB increase on locations that comply with biological indicators
No growth or reduction of biomass if targets are not reached
What does it take to make salmon farming in Chile sustainable?
13
Thank you for the attention