Regin Jacobsen Chief Executive Officer Bakkafrost, Faroe Islands

Transcription

1 Regin Jacobsen Chief Executive Officer Bakkafrost, Faroe Islands

2 LESSONS FROM THE FAROE ISLANDS REGIN JACOBSEN, CEO TASMANIAN SALMON SYMPOSIUM Hobart, 6 th December 2017

3 FAROE ISLANDS 18 islands 1,387 km 2 50,250 inhabitants (July 2017) Home rule within the Kingdom of Denmark Part of the Danish monetary union, Danish krone (DKK) Key sectors (% of wage earners, 2016) Service/public admin.: ~34% Private service: ~31% Construction: ~13% Fishing : ~21% Unemployment rate (June 2017): 2.2% Total working force (July 2017): 26,029 GDP: DKK ~18bn (2016) GDP/capita: DKK 360,000 (2016) (Norway: DKK 455,000) (2016) Total export of fish products (2016) 15% increased DKK 7,680 million whereof farmed fish accounts for 48% TAXES Total percent of GDP: 42.4% (2013) Corporate tax: 18% Farming revenue tax : 4.5% of revenues from 1 January 2016 more details see page 44 in Bakkafrost CMD presentation from June 2016 Restriction on single foreign ownership of 20% in farming companies One company may max. control 50% of licences in the Faroe Islands Source: Hagstova Føroya Page 3

4 FAROE ISLANDS EXCELLENT CONDITIONS FOR FARMING HIGH QUALITY SALMON Page 4

5 FAROE ISLANDS EXCELLENT CONDITIONS FOR FARMING HIGH QUALITY SALMON Remote location Pristine clear waters Cool steady sea temperatures Strong currents Page 5

6 FAROE ISLANDS EXCELLENT CONDITIONS FOR FARMING HIGH QUALITY SALMON GEOGRAPHY Natural growth area for wild salmon Faroese fjords provide separation between locations Improves biological control and area management Average Seawater Temperatures ºC Faroe Islands Norway (Trøndelag) WATER Stable seawater temperatures throughout the year between 6-12 degrees Celsius Excellent water quality and circulation conditions LOCATION Efficient distribution to European, US and Far Eastern markets 8 6 BIOMASS Biological sustainability setting the biomass target per license 4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Company material, Havforskningsinstituttet Page 6

7 LACK OF FARMING STRUCTURE companies 63 farming sites No area segregation No segregation between generation of fish Cross contamination Spreading of lice, virus and bacteria The tragedy of the commons is challenging to avoid in a fragmented industry Page 7

8 Production [1.000 t wfe] THE FARMING INDUSTRY IN THE FAROE ISLANDS Farming Industry companies 28 companies Industry consolidation to 3 companies Hitra disease Furunkolosis 1986 BKD ISA New Veterinary Regime Page 8

9 Harvest (thousand tonnes HOG) Number of ISA cases BIOLOGICAL CONTROL CRITERIA 1 A GOOD REGULATORY FARMING ENVIRONMENT During the period the Faroe Islands were severely struck by ISA outbreaks Biological meltdown paved way for robust regulatory regime New legislation and regulation was introduced in 2003 known as The Faroese Veterinary Model : One generation based farming model Fallowing periods between each generation Immunisation and vaccination programs Restricting movement of equipment and fish Density limits introduced Brood stock facilities allowed on land only Fish for harvest not allowed in open waiting cages at harvest station 0 0 Minimum distances between farms and hatcheries Number of ISA cases Harvest (thousand tonnes HOG) Strict rules to fight and control sea-lice introduced Source: Bakkafrost, Kontali The Model has resulted in one of the most predictable fish production environments in the world with good KPI for salmon farming, such as FCR, Mortality and Growth rate The mortality rate with the Faroese Veterinary Model has been between 5 and 10% compared to 20 to 25% before despite the annual production has never been higher than now Page 9

10 VOLUNTARY ACTION SWITCH OF FARMING LICENSES VESTMANNA GØTUVÍK Agreement between Bakkafrost and Luna The agreement between Bakkafrost and Luna in 2013 MHG Bakka Benefits from the switch (*) Improved fallowing system Luna Reduced biological risk Improved industrial structure Vestmanna Gøtuvík Faroe Farming Page 10

11 THE FARMING STRUCTURE IN farming companies Bakkafrost Marine Harvest Luna Good regulatory regime Segregation of farming sites and operations Page 11

12 SHARE OF PRODUCTION BIOLOGICAL CONTROL CRITERIA 2 FEW PLAYERS IN EACH PRODUCTION REGION A tight regulatory regime is not enough A large number of decisions will always be left to the operators As opposed to most other industries, operators are directly exposed to each others behaviour Efficient production requires a high degree of cooperation in the waters, e.g. Coordinated fallowing periods Coordinated lice treatment in direction of current Hard to get «all the ducks in a row» as coordination will always carry a cost to some operator, e.g. Requirement to await next generation to join new fallowing regime Self reporting of disease in order to protect surrounding farms 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Highly fragmented industry, except Faroes Other; 70 players Other; 15 players Norway Chile UK North America The tragedy of the commons is challenging to avoid in a fragmented industry Faroes Source: Kontali Page 12

13 BIOLOGICAL CONTROL CRITERIA 3 MINIMISE EXPOSURE TO OTHER COMPANIES IN EACH PRODUCTION AREA Strong regulatory framework Few players to agree on coordination of unregulated matters avoids tragedy of the commons Limited overlap of players within production zones Swaps have enforced each players independence Existing licenses are operated on a 12-year rolling lifespan system Automatic renewal unless Failure to fulfill the veterinary conditions Conflict with governmental or municipalities planning areas Conflict with animal welfare Conflict with environmental protection License give right to utilise given area of fjords for farming fish No MAB, but strict regulative measures on farming activity maintaining environmentally sustainability Page 13

14 HARVEST WEIGHT STRONG RESULTS FORM FAROESE VETERINARY MODEL Average weight harvested salmon [kg wfe] Average size on Harvested salmon increased 20% Average harvest weight per salmon in Faroese fish farms increased 20% in (New veterinary model), compared to the period before ISA breakout in the Faroe Islands from 4.95 to 5.92 kg wfe 6,0 5,8 5,6 5,4 5,2 5,0 4,8 4,6 4, Page 14

15 FCR STRONG RESULTS FROM FAROESE VETERINARY MODEL FCR Feed Conversion Rate (FCR) decreased 3% Average Feed Conversion Rate in Faroese fish farms decreased 3% in (New veterinary model), compared to the period before ISA breakout in the Faroe Islands from 1.22 to 1.14 kg wfe Normally FCR would increase with larger fish, but despite 20% increased average weight FCR decreased 3% 1,24 1,22 1,20 1,18 1,16 1,14 1,12 1, Page 15

16 GROWTH RATE STRONG RESULTS FROM FAROESE VETERINARY MODEL Growth rate [TGC] Growth rate increased 10% The average Growth Rate in Faroese fish farms increased 10% in (New veterinary model), compared to the period before ISA breakout in the Faroe Islands from 2.75 to ,05 3,00 2,95 2,90 2,85 2,80 2,75 2,70 2,65 2, Page 16

17 PRODUCTIVITY STRONG RESULTS FROM FAROESE VETERINARY MODEL Productivity per released smolt [kg wfe] Productivity increase of 41% The average Productivity per released smolt in Faroese fish farms increased 41% in (New veterinary model), compared to the period before ISA breakout in the Faroe Islands from 3.83 kg to 5.42 kg 6,0 5,0 4,0 3,0 2,0 1, Page 17

18 COMPETITIVE ADVANTAGE CREATED FROM FAROESE VETERINARY MODEL Yield per smolt (HOG) Average harvest weight (HOG) Norway Chile UK Faroe Islands Norway Chile UK Faroe Islands Yield per smolt a key KPI Average mortality (%) Function of average harvest weight and mortality Faroe Island performs on both parameters No use of antibiotics last 15 years Norway Chile UK Faroe Islands Source: Kontali Page 18

19 A GOOD VETERINARY REGIME LEADS TO HIGHER VALUES Farming margin as EBIT per kg is one KPI on value BAKKA had a margin of 18 NOK/kg in average in compared with 7,50 for the pier group BAKKA had a margin of 34 NOK/kg in average in compared with 18,17 for the pier group BAKKA had a margin of 34 NOK/kg in average in YTD compared with 22,05 for the pier group EBIT per kg farming [NOK] listet companies on Oslo Stock Exchange BAKKA Salm NRS LSG MHG GSF SSC avg YTD avg Source: Carnegie Investment Bank Page 19

20 Monitoring biosecurity

21 ROUTINE SURVEILLANCE Regular inspection and testing by third party Different frequency of two weeks, monthly and quarterly Inspection check, lice and gill test, veterinary inspection and sampling, authority inspection and sampling Three farming companies operate in the Faroes Easier to coordinate biological improvement Knowledge sharing Good cooperation with authorities Authorities Inspections, certifications, monitoring, dashboard restricted and public Bakkafrost s fish health team A strong team with proved track record, certified veterinarians, biologists, and assistants Page 21

22 22 SALMON WILD VS. FARMED As for wild catch in general, wild salmon catch revolves around a stable average Wild salmon s impact on farmed salmon prices has gradually diminished 2,400 2,200 2,000 1,800 Output farmed and wild salmon (1,000 tonnes HOG) 1,600 1,400 1,200 1, Wild Farmed Source: Kontali Page 22

23 GROWTH REQUIRES NEW FARMING METHODS AND FOCUS ON SUSTAINABILITY Example on important areas How to expnad Salmon farms from sheltered to new areas Fish health and welfare Product quality and safety Local pollution Healthy and nutritious food Biosecurity Government regulation and compliance Sustainable fish feed Collaboration and certification Water Innovation Avoid the tragedy of the commons in the industry Page 23

24 Page 24

25

26 PANEL FUTURE FARMING Joachim Buarø Product Certification Aquastructures, Norway Regin Jacobsen Chief Executive Officer Bakkafrost, Faroe Islands Patrick Tigges Managing Director Billund Aqua Australia Michael Sylvester Chief Executive Officer PFG Group Thierry Chopin Professor of Marine Biology University of New Brunswick, Canada Adam Main Chief Executive Officer Tasmanian Salmonid Growers Association