Rolls Royce on worn tires

by GUSTAV-ERIK BLAALID, EDITOR gustav@fishfarmingxpert.com

Norway’s listed salmon companies have in turn presented their figures for the third quarter of 2013 and all of them are showing historical figures. The best quarter ever reported. Great. We are delighted with the owners of the companies and note that earnings have never been higher than they are at the moment in Norway and Europe. The reason is the very favorable market conditions for salmon. Demand is rising, while production growth levels off. These two variables lead to high prices, and it appears that this situation will persist for the foreseeable future if there aren’t any major changes. In this situation, the companies will make a lot of money. We believe that salmon producers in the last quarter of this year and in the first two quarters of 2014 will report new records. In a situation where coffers grow it will be interesting to see what the owners are doing. In listed companies, the investors expect dividends and corporate attractiveness includes dividend policy. The fact that Marine Harvest is among the most popular shares at the Oslo Stock Exchange, is partly due to an aggressive dividend policy and high transferability of the shares. We believe this is an unfortunate development. The owners shall, of course, have a return on their assets and investments. We believe that a greater share of the profits of companies should be reinvested. The investment needs are huge. If the salmon companies are to overcome the problems that afflict the industry a paradigm shift is needed. It is no longer enough to focus on single diseases or whether sea lice problems are about which chemicals are more or less harmful. It is about the way salmon production is run. The industry is reluctant to take this debate. We think that this is not future oriented. With the income situation as it is, much more focus should be concentrated on innovation and development. The fact that the same kind of net pens that were used for breeding in the 1960s are still being used today, testifies about an industry that has stood still in critical areas. The administration has not shown intrusive interest in innovation, either. Through policy objectives, the government has a decisive influence on the development of the salmon industry. This applies to all salmon producing countries. Over the years, the rules have become stricter and more detailed. But maybe the policymakers and specialists have to make a new assessment of the management regime. When we know that low density is possibly the one thing that most strongly affects fish health in a positive direction, why is the framework not sharpened in that direction? Why are the authorities in Norway so obsessed with the regulatory rule like maximum allowable biomass. Why not focus more on fish health when the authorities exercise supervision and control? In Norway we have the Food Safety Authority who supervises fish health and registers all disease outbreaks. They also register the presence of lice, and they can impose compulsory slaughter if the fish is sick or has too many lice. In Chile Sernapesca plays a similar role. Reduced density, production of post smolt(up to about 1 kilo) in closed systems , taking care of all the waste from these facilities, production of a larger portion of salmon feed from resources produced by the industry itself (e.g. algae), are some of the changes that have to be done. It is unrealistic to believe that the salmon industry in Norway or Chile can grow to several million tons without these changes. And this requires investment. Significant investment.

It is great that John Fredriksen and the other salmon investors earn enough money to buy expansive cars. But they drive on worn tires. And that is dangerous.