29/06/2007 - Traditional fisheries triumph over salmon

WEEKEND FEATURE: Traditional fisheries triumph over salmon

NORWAY
Friday, June 29, 2007, 23:50 (GMT + 9)


Norway within a short time has been the major arena for stock listed fishery and aquaculture companies. Within the last year a number of companies have been listed, including Peruvian fishmeal producer Copeinca, Norwegian salmon farmer Salmar, and the Norwegian owner of pelagic processing facilities and fishing vessel in Norway and South America, Austevoll Havfiske.

Other global players such as Marine Harvest and Lerøy Seafood Group, all large companies in the international salmon industry, have made the Oslo Stock Exchange their playground. As has Marine Farms ASA, a company involved in the development of aquaculture involving a number of species worldwide. Other companies include the semi-governmental controlled Cermaq, which in addition to controlling the fish feed producer EWOS are producing salmon in a number of countries.

The last year has been a triumph for shares in traditional fishery and seafood companies against the shares in the salmon farming industry.

Salmon prices have gone down, and are far below the prices of last year, but sales are rocketing in volume, as a result. Whether this is reflected in the value of share prices is unknown. Though, if compared with the general development of Norwegian shares, many investors would be a lot better off investing in many other sectors.

The general performance

The last 12 months have seen the average index value of Norwegian shares increase from 425 to 575 of Wednesday this week. This is an incredible increase in value. However, it is still what the fishery and aquaculture industry has for benchmarking. Nobody invests large sums of money just for their love of eating salmon. They do so because they believe in an increasing share value.


The value of the shares on Oslo Stock Exhange have incrreased last 12 months.




FISHERYCOMPANIES

Aker Biomarine ASA

The Oslo Stock Exchange has a number of different companies listed. Some are mainly involved in fishing, others in processing and other still in aquaculture. Some like Aker Biomarine are a newly listed company involved in the high risk activity of trawling for krill in the Antarctica and developing products from the catch. The company listed is a continuation of Natural ASA, a developer of fish oil products acquired by Aker Biomarine. The company changed name and ticker as recently as 6 June.



The last 12 months have seen this company more than double its share value.


“Aker BioMarine utilizes its unique krill harvesting position to develop its own downstream operations within the high value added nutraceuticals, pharmaceuticals and aquaculture feed markets. The Company is also a leading surimi producer through its significant international harvesting operations.”

A year ago shares could be bought for NOK 26.00, and a couple of months later for as little as NOK 24.50. Since thae they have increased to a top of NOK 57.00 in January. As the hype around the krill fishery has died somewhat down, prices have on fallen further to NOK 47.50.

There are reasons to believe that shares will continue to fall until the company can present the market with some optimistic news. The shares are still to be considered winners. But the glory is fading, and the company has a market value of NOK 4.280 billion.

Aker Seafood ASA

Having shown a very positive development, increasing in value from NOK 30.00 to NOK 51.00 has made this company a winner. A week ago the shares listed at NOK 54.75 were on the top. The company has a market value of NOK 2.477 billion.







“Aker Seafoods activities are based on wild fish resources. The Aker Seafoods Group harvests, processes, and sells seafood from regulated fisheries that are and will remain renewable if properly managed.”

Austevoll Seafood ASA

The company has been listed on the market only since late last autumn, with shares as another winner on the market. Just after listing the shares did fall slightly to NOK 36.00, but since then the company without making much noice in the media, has been climbing steadily. Their shares were valued at NOK 60.25 a couple if days ago, but have fallen slightly back to NOK 58.00.

There are confusing signals in the fishmeal market about prices. They are staying high in Peru, but in Europe signs are contradictory. If fishmeal prices continue to rise, this will increase the value of this company.

They also acquired a 50 per cent share of Europe's largest pelagic processor Shetland Catch Ltd recently. These shares are already winners, and there are reasons to believe the top has not yet been reached. Their strength lies in their management team, all of whom have extensive experience at all levels of the fishery industry. The company has a market value of NOK 10.69 billion.





“The Austevoll Seafood group is a significant player in pelagic fishery, fishmeal/oil production, processing of fish for human consumption, sale of fish products and salmon farming”.

Copeinca ASA

This company was listed on the Oslo Stock Exchange end of January. It is not fair to compare the development with other companies that have been listed much longer. But in the nearly half-year period that the shares have been traded, they have increased from NOK 45.00 to NOK 69.50. This is a very good return on less than six months.





“Copeinca is one of most important fishmeal and fish oil players in Peru, the world's largest producer and exporter of fishmeal and fish oil. Copeinca owns a large fleet and several plants and exports most of its production, primarily to Asia and Europe.”

As for Austevoll Seafood future developments will depend a great deal on the development of fishmeal prices. In fact, the increased usage of land for production of bio-fuel raw material instead of proteins for use in animal feed and food for human consumption factor may put an upward pressure on fishmeal prices in a longer perspective.

So some of the fast growing aquaculture industries world wide are very dependent on large supplies of fishmeal. The company has a market value of NOK 10.64 billion.

Domstein ASA

This is a traditional Norwegian company. They have tried salmon, and more or less moved on to the whitefish and pelagic sector. Domstein is one of the main shareholders in the new gigantic pelagic company, Norway Pelagic, which has been operative within a matter of days, which will reduce the financial risk. Processing facilities are rented out to the new company.

With historically high herring quotas there is always a chance of collapse in herring prices, but the new company will function as a buffer against the risk.

Domstein is also a large exporter of mackerel to Japan. This market has been troublesome for some years. But again, the new company Norway Pelagic will reduce the risk.





"Domstein delivers raw materials and semi-finished products to the seafood industry around the world. In Scandinavia Domstein is one of the leading suppliers of value added products."

As a large supplier of value added products to the North European market Domstein has more than one leg. However, despite this, the shares have been of no value for long-term investors last year.

Short time in-and-out investors may have benefited from the up and down movement. The shares, which could be acquired for NOK 5.75 a year ago, are currently traded for NOK 5.35.

In January the value was as low as NOK 4.65, but was helped by the acceptable financial results and successful negotiations resulting in the formation of Norway Pelagic pushing the shares up to a maximum of NOK 6.50 before they started to fall back. The company has a market value of NOK 372 million.

AQUACULTURE COMPANIES

The largest salmon farming companies in the world, Cermaq and Marine Harvest, are listed on the Oslo Stock Exchange. In addition there are a number of other salmon farmers and aquaculture companies listed. We will look only at the predominant salmon farming companies.

The value of the salmon shares is very much influenced by the salmon price. Small investors are watching the fluctuations from week to week in price, and are buying in on the hope that many investors believe a small increase in the salmon price will give a large increase in the share values.

Marine Harvest ASA

This is the world largest salmon farmer. It is a result of the merger of Pan Fish and Marine Harvest.

Pan Fish has been a company loved by day traders for years, and remains so.

Under the leadership of CEO Atle Eide, however, the company has gone from being close to bankruptcy to being blown into life reducing losses for the banks, and becoming the world most powerful player in the salmon market.

The shares were traded at NOK 7.30 one year ago. Since then have they been down to NOK 4.78 and as high as NOK 8.30. Wednesday this week the company was trading at NOK 6.20.

When shares started to fall from the top a couple of months ago, it dipped under NOK 5,00 before settling around the current value.

The next test will be later this year when the autumn salmon prices are settled. The company is valued to NOK 21.6 billion.





“Marine Harvest is the world's leading seafood company. We offer our customers and consumers a wide range of seafood products and produce one third of the world's farmed salmon and trout. The company is present in 20 countries and has 9 000 employees worldwide.”

Cermaq ASA

Cemaq has been a much better investment over the last 12 months than Marine Harvest. Shares bought at NOK 85.00 one year ago are currently worth 105.50. But as Marine Harvest, Cermaq reached a top earlier this year, at NOK 129.00.

The company has been a good investment seen in an historic 12-month perspective. Currently the shares have been affected by falling salmon prices, and new signs for developments in share value is not expected before the autumn sets in and salmon sales increases in volume.

With very large volumes already been emptied from Norwegian farms, there is reason to believe that the demand may get higher than the supply in November and December.

Saltwater temperatures are already high, and if the summer proves to be like last year, this could result in a reduced biomass growth. The winners will then be the companies that are able to deliver.

Cermaq has a larger share of the production in the North, than the situation of Marine Harvest. They have a cluster of farms in the southern county of Rogaland, an area very much exposed to high water temperatures in the summer. The company is valued to NOK 9.75 billion.





“Cermaq is a leading international group of companies with activities in fish farming, salmonid feed production and research in aquaculture. Cermaq has operations in Norway, Scotland, Canada and Chile.”

Lerøy Seafood Group ASA

Old traditions in trading and value adding have been merged into the salmon farming practices of Lerøy Seafood Group. After being publicly listed the company has grown fast by acquiring salmon farming capacity in a number of countries.

The shares are currently traded at NOK 121.00 that is three per cent down on NOK 125,00 a year ago. During the period the shares have been as high as NOK 143,00 and as low as NOK 98.25. To predict the future is difficult. The salmon price is the main factor. The company is valued to NOK 6.45 billion.





“Lerøy Seafood Group ASA is one of Norway's leading seafood companies with world-wide trade. The company has significant ownership in seafood production in Norway, Sweden and the UK.”

Salmar ASA

This is a medium-sized company on the Oslo Exchange, but is one of Norway’s larger salmon farmers. Since its listing 8 May, it has moved very little. The current value of NOK 39.00 is a bit higher than the NOK 38.00 at the day of being listed. It is a company to be watched. There are hungry dogs out there looking for a prey. The market capitalisation of NOK 4.02 billion makes it a realistic target for some.




“Salmar is a Norwegian farmed salmon producer. The company operates 46 wholly owned licences in mid-Norway and Troms. Salmar also owns 50 per cent of Scottish Sea Farms, the UK's second largest salmon producer, and operates a comprehensive VAP activity at Frøya in Sør-Trøndelag.”

Grieg Seafood ASA

The company is the second newcomer on the stock exchange, and was listed 21 June. Since then have it traded slightly above the value at the day of initial listing of NOK 23.50. After jumping to NOK 24.50 is it at time of writing down to NOK 23.60.




“Grieg Seafood ASA is an integrated Norwegian seafood company with operations within salmon fish farming and processing. The Company has operations in Norway, Canada and Canada with a total production capacity of 80,000 tonnes gutted weight.”

It should not surprise anybody if negotiations regarding a merger between Salmar and Grieg Seafood happens in the not to distant future. The alternative is that Cermaq acquires one of them. In both cases this will push share values up.

The consolidation in the salmon industry is far from over. And to meet the competition from giants like Marine Harvest and Cermaq there is one obvious solution. Lower prices on salmon may push such process to happen faster.

By Terje Engoe
www.fis.com