Pan Fish bounces back with salmon market
future of the market, making three acquisitions in the space of a
week.
"Strong market, rising volumes and lower costs ahead," Pan Fish declared in its second quarter results, released at the same time as the acquisition announcements.
The company's ambition to be the lowest cost global producer of salmon, whether cut or salted, in a market that is growing serves as an indication that demand has bounced back for the fish.
The salmon farming industry has been consolidating, with larger producers snapping up the smaller ones. This year companies have been experiencing good sales in a market with limited supplies,according to an analysis by Globefish.org.
As a result prices have been increasing steadily to 2000 levels in the aftermath of a dioxin health scare and a trade dispute between the European Commission and Norway's salmon exporters.
Pan Fish hopes to ride the price rise through organic growth and by making more acquisitions. The company, which is emerging from financial difficulties, made three strategic acquisitions at theend of August to add to its operations in Norway, Scotland, Canada, the Faroes, France and Japan.
The company purchased a salmon farming company and a smolt producer in Scotland. It has also bought an additional production licence in Norway. Pan Fish also sold its stake in Austevoll Havfiskefor €10.2m. The acquisitions add to the company's attempt to have fully integrated operations, from production, farming, processing and packaging to sales.
The company's €8.1m purchase of Murray Seafood in Scotland will boost Pan Fish's annual output by at least 2,500 tonnes, roughly equivalent to three Norwegian licences.
The purchase of Corrie Mohr, valued at €8m, will make Pan Fish Scotland completely self-sufficient in smolt, and will cut smolt costs in Scotland by up to 50 per cent, the company stated.
In a transaction worth €635,000 Pan Fish Norway also acquired the remaining 50.1 per cent of the shares in Oppdrettslaks, which owns a salmon production licence. The licence is located close toPan Fish Norway's other operations, giving the company control of a large fish farming bay.
The money from the sale of the company's 11.9 per cent minority stake in Austevoll Havfiske in Norway will be used either for core business activities or for reducing debt, the company stated.
"The acquisitions strengthen our position, while the sale of our stake in Austevoll Havfiske strengthens our financial position and enables us to continue to participate in the industry'songoing consolidation," stated Pan Fish's chief executive, Atle Eide.
About 60 per cent of Pan Fish Scotland's production goes to customers in the UK. The rest is exported to other EU countries, the US and Japan. Pan Fish France is based in Finisterre in Brittany andis one of the larger producers of smoked salmon in France. Pan Fish Norway is a fully integrated operation holding 44 licences.
Pan Fish was refinanced in May 2005 and given a clean bill of financial health from Norway's regulators after suffering problems last year. The company has cut net interest-bearing debt by halfover the past year, reducing it by €90.4m during the second quarter 2005.
In the company's second quarter report Eide noted that demand for salmon in both the EU and US is very strong at the moment, with prices at a level not seen for several years.
"Demand is strong in both regions which, combined with a moderate growth in production, means that we expect to see a reasonably balanced market over the next few years," Eidestated. "In the time ahead Pan Fish will bring a rising volume of increasingly cost-effectively produced quality salmon to the market. Over the next three years our costs will drop sharplyfrom current levels, and the volume of output from our existing facilities and licenses will rise to around 100,000 tonnes round weight."
The company's fish farming business had revenues of €53.3m in the second quarter 2005, compared with €65.9m in the same period last year.
The reduction is primarily due to a 35 per cent cut in harvesting volumes. The company did not harvest any fish in Canada or the Faeroes during the second quarter.
Operating loss for the quarter was 4.6m compared to a loss of 5.3m in the same period last year.
The company suffered through months of dumping and subsidy accusations followed by punitive EU import duties on Norwegian salmon. The result was Norway replaced previous measures on 1 July 2005 bynew minimum import prices for its farmed salmon.
In Norway, a major restructuring of the salmon industry is now taking place as the local banks are selling off their shareholdings in some of the largest salmon companies, reports Globefish.org.
