MARINE HARVEST This handbook may be deemed to include forward-looking statements that reflect Marine Harvest's current expectations and views of future events. Some of these forward-looking statements can be identified by terms and phrases such as 'anticipate', 'should', 'likely', 'foresee', 'believe', 'estimate', 'expect', 'intend', 'could', 'may', 'project', 'predict', 'will' and similar expressions. These forward-looking statements include statements related to population growth, protein consumption, consumption of fish (including both farmed and wild capture), global supply and demand for fish (and salmon in particular), aquaculture's relationship to food consumption, salmon harvests, demographic and pricing trends, market trends, price volatility, industry trends and strategic initiatives, the issuance and awarding of new farming licenses, governmental progress on regulatory change in the aquaculture industry, estimated biomass utilization, salmonid health conditions as well as vaccines, medical treatments and other mitigating efforts, smolt release, development of standing biomass, trends in the seafood industry, expected research and development expenditures, business prospects and positioning with respect to market, and the effects
of any extraordinary events and various other matters (including developments with respect to laws, regulations and governmental policies regulating the industry and changes in accounting policies, standards and interpretations). The preceding list is not intended to be an exhaustive list of all our forward-looking statements. These statements are only predictions based on Marine Harvest's current estimates or expectations about future events or future results. Actual results, level of activity, performance or achievements could differ materially from those expressed or implied by the forward- looking statements because the realization of those results, the level of activity, performance or achievements are subject to many risks and uncertainties, including, but not limited to changes to the price of salmon; risks related to fish feed; economic and market risks; environmental risks; risks related to escapes, biological risks, including fish diseases and sea lice; product risks; regulatory risks including risk related to food safety, the aquaculture industry, processing, competition and anti-corruption; trade restriction risks; strategic and competitive risks; and reputation risks. All forward-looking statements included in this handbook are based on information available at the time of its release, and Marine Harvest assumes no obligation to update any forward-looking statement.
Updated as of 29 June 2015 2
The Marine Harvest Salmon Farming Industry HandbookThe purpose of this document is to give investors and financial analysts a better insight into the salmon farming industry, and what Marine Harvest considers to be the most important value drivers.
Updated as of 29 June 2015 3
Table of content1. Introduction 58. Financial Considerations 46
8.1 Working capital 46
2. Definition of Segment 6 8.2 Capital return analysis 49
2.1 Seafood as part of a larger protein space 6 8.3 Currency overview 51
2.2 Stagnating wild catch - growing aquaculture 7 8.4 Price, cost and EBIT development in Norway 53
2.3 Fish consumption 8 8.5 Effects of geographical diversification 54
2.4 Salmonids contribute 4.2% of global seafood supply 9
2.5 Large opportunities within aquaculture 10 9. Barriers to entry - Licences 55
2.6 Supply of farmed and wild salmonids 11 9.1 Regulations of fish farming in Norway 56
2.7 Salmonids harvest 2014 12 9.2 Regulations of fish farming in Scotland 60
2.8 A healthy product 13 9.3 Regulations of fish farming in Chile 61
2.9 Resource efficient production 14 9.4 Regulations of fish farming in BC, Canada 62
2.10 Climate friendly production 15
2.11 Relative price development of protein products 16 10. Risk Factors 63
10.1 Salmon disease prevention and treatment 63
3. Salmon Supply 17 10.2 Most important health risks for the salmon 64
3.1 Historic total harvest of Atlantic salmon 1995-2015E 17 10.3 Fish health and vaccination (Norway) 65
3.2 Diminishing growth expected going forward 18 10.4 Research and development focus 66
3.3 Few coastlines feasible for salmon farming 19
11. Indicators Determining Harvest Volumes 67
4. Salmon Markets 20 11.1 Projecting future harvest quantities 67
4.1 Global trade flow of farmed Atlantic salmon 20 11.2 Yield per smolt 68
4.2 Farmed Atlantic salmon by market 21 11.3 Development in standing biomass during the year 69
4.3 Development of value vs. Volume 22
4.4 Price neutral demand growth - historically 6-7% 23 12. Secondary Processing (VAP) 70
4.5 Supply and demand - historic prices 24 12.1 European value-added processing (VAP) industry 71
4.6 Historic price development by local reference prices 25 12.2 Market segment in the EU (2012) 72
4.7 Different sizes - different prices (Norway) 26 12.3 The European market for smoked salmon 73
5. Industry Structure 27Appendix 74
5.1 Top 5-10 players of farmed Atlantic salmon 27 Weight conversion ratios and key words 75
5.2 Number of players in producing countries 28 Price indices vs. FOB packing plant 76
Some historic acquisitions and divestments 77
6. Salmon Production and Cost Structure 29 Atlantic salmon production cycle 79
6.1 Establishing a salmon farm 29 Sustainability of fish feed 80
6.2 The Atlantic salmon life/production cycle 30 The Global Salmon Initiative & the ASC 81
6.3 Sea water temperature's influence 32 Marine Harvest history 82
6.4 Production inputs 33 MHG - Leading position across the value chain 83
6.5 Cost component - disease and mortality 35 Marine Harvest farming 84
6.6 Accounting principles for biological assets 36 Marine Harvest sales network 85
6.7 Economics of salmon farming 37 Marine Harvest processing facilities 86
6.8 Cost structure for Marine Harvest in 2014 38 Marine Harvest sales channels (2014) 87
6.9 Production costs for Marine Harvest in 2014 39 Sources for industry and market information 88
7. Feed Production 40
7.1 Overview of feed market 40
7.2 Relative feeding 42
7.3 Salmon feed producers 43
7.4 Salmon feed ingredients 44
7.5 Feed raw material market 45
4
1. IntroductionSalmon is the common name for several species of fish of the family Salmonidae (e.g. Atlantic salmon, Pacific salmon), while other species in the family are called trout (e.g. brown trout, seawater trout). Although several of these species are available from both wild and farmed sources, most commercially available Atlantic salmon is farmed. Salmon live in the Atlantic Ocean and the Pacific, as well as the Great Lakes (North America) and other land locked lakes.
Typically, salmon are anadromous: they are born in fresh water, migrate to the ocean, then return to fresh water to reproduce.
About 70% of the world's salmon production is farmed. Farming takes place in large nets in sheltered waters such as fjords or bays. Most of the cultured salmon come from Norway, Chile, Scotland and Canada.
Salmon is a popular food. Salmon consumption is considered to be healthy because of inter alia its high content of protein and Omega-3 fatty acids as well as being a good source of minerals and vitamins.
Note: The quantity figures in this industry handbook are mainly expressed in GWE (gutted weight equivalent). For 5a weight conversion table, see appendix.
2. Definition of Segment2.1 Seafood as part of a larger protein space
Protein sources for
human consumption
Fish
6.5 %
Other
60.5 %
Land
animal
33.0 %
Implied protein consumption300 driven by population growth only
250
200
150
100
50
~40%
Vegetal
Proteins
Animal
Proteins
Fish Proteins
0
2011 2050
Although 70% of the Earth's surface is covered by water, only 6.5% of the protein sources for human consumption is produced in this element.
The UN estimates that the global population will grow to approximately 9.6 billion by 2050. Assuming consumption per capita stays constant, this implies a 40% increase in demand for
protein. The UN however, estimates actual demand to double. Knowing that resources for
increased land based protein production will be scarce, a key question is how protein production
in sea can be expanded.
Sources: FAO (2011); FAOstat Food Balance Sheets, FAO Statistical Yearbook 2014 6
United Nations population data; World Population Prospects: The 2012 Revision
2. Definition of Segment2.2 Stagnating wild catch - growing aquaculture
180
160
140
120
100
80
60
40
20
0
2000 2004 2008 2012 2016 2020
Wild capture for human consumption Farmed Atlantic salmon
Aquaculture for human consumption Population rebased
Over the past few decades, there has been a considerable increase in total and per capita fish supply, and aquaculture is a major contributor to this as it is the fastest growing, animal-based food producing sector, and it outpaces population growth.
Great progress in breeding technology, system design and feed technology in the second half of the twentieth century has enabled the expansion of commercially viable aquaculture across species and in volume. In 2011, China alone produced 62% of global aquaculture production, while Asia as a whole accounted for 88%.
The World Bank developed a scenario analysis in their report Fish to 2030 (2013) projecting that aquaculture will continue to fill the supply-demand gap, and that by 2030, 62% of fish for human consumption will come from this industry.
Aquaculture provides close to half (49%) of all fish supplies destined for direct human food consumption, yet fish was estimated to account for only 6.5% of the global protein consumption (and about 14% of total fish and animal protein supply).
Sources: FAO (2013) World Fisheries and Aquaculture, FAO Statistical Yearbook 2014 7
OECD-FAO (2013) Agricultural Outlook
World Bank (2013) Fish to 2030
2. Definition of Segment2.3 Fish consumption
Development of global average Fish consumption per continent
fish consumption 2009-2011
Given the expected production growth of 23.6% during the 2010-30 period and the projected world population growth of 20.2% over the same period, the world will most likely manage to increase the fish consumption level, on average.
In 2030, per capita fish consumption is estimated to be 18.2kg (vs. 9.9kg in the 1960s and 19.2kg in 2012). This is equivalent to another 23 million tonnes supply of seafood, which aquaculture will have to provide.
The trend in per capita consumption, however, is diverse across regions. In general, per capita fish consumption is expected to grow fast in the regions with the highest projected income growth, such as China, India and Southeast Asia. A declining trend of fish consumption per capita is however projected for Europe, Central Asia, South America and Sub-Saharan Africa
Source: World Bank (2013): Fish to 2030 8
FAO (2014); The State of World Fisheries and Aquaculture
2. Definition of Segment2.4 Salmonids contribute 4.2% of global seafood supply
Although several of the salmon species are available from both wild and farmed sources, almost all commercially available Atlantic salmon is farmed. Even with an increase in production of Atlantic salmon of more than 600% since 1990, total global supply of salmonids is still marginal compared to most other seafood categories (4.2% of global seafood supply). Whitefish is about ten times larger and consists of a much larger number of species.
In 2013, harvest of Atlantic salmon was greater than Atlantic cod and pangasius. Compared to two of the largest whitefish species, tilapia and Alaska pollock, Atlantic salmon is still about half the volume harvested.
Note: Live weight (LW) is used because different species have different conversion ratios 9
Source: Kontali Analyse
2. Definition of Segment2.5 Large opportunities within aquaculture
The illustration above shows that Atlantic salmon has the highest level of industrialisation and the lowest level of risk amongst other aquaculture products. The size of the circles indicates volume harvested.
Although Atlantic salmon is relatively small in harvest volume compared to other species, it is a very visible product in many markets due to the high level of industrialisation.
Source: Kontali Analyse 10
2. Definition of Segment2.6 Supply of farmed and wild salmonids
The general supply of seafood in the world is shifting more towards aquaculture as the supply from wild catch is stagnating in several regions and for many important species. Wild catch of salmonids is varying between 700 000 and 1 000 000 tonnes GWE, whereas farmed salmonids are increasing. The first year the total supply of salmonids was dominated by farmed, was in
1999. Since then, the share of farmed salmonids has increased and has become the dominant
source.
The total supply of all farmed salmonids exceeded two million tonnes (GWE) in 2014. The same year, the total catch volume of wild salmonids was about one fourth of farmed, with chum, pink and sockeye being the most common species.
About 25% of total wild catch of salmon has been imported frozen by China (from the US, Russia and Japan), and later been re-exported as frozen fillets.
Source: Kontali Analyse 11
|
distributed by
|
