March 30, 2012
Marine Harvest to build new fish feed plant
Marine Harvest will put up a new fish feed complex for manufacturing salmon feeds for its aquaculture business.
Currently it is purchasing two-thirds of its feeds from Skretting, a Nutreco subsidiary.
The Norwegian company has entered into agreements with the largest European institute for applied research within fisheries, aquaculture and food, Nofima, and the leading Norwegian agricultural feed producer, Felleskj？？pet Rogaland Agder.
The cooperation should lead to establishing a leading Norwegian salmon feed company with a yearly production capacity of up to 500,000 tonnes of salmon feed.
Although locations of production are not yet decided, Marine Harvest has signed an agreement with Valsneset Energi og Industriselskap AS based in the municipality Bjugn in Mid Norway for the utilisation of land property.
Marine Harvesthas carried out a pre-study of the business case for establishing a feed company. Based on this pre-study the project will now enter into a new phase with detailed assessments.
A decision on whether or not to proceed with the establishment of the fish feed company will be taken once the conclusions from this study are available.
"We believe the establishment of a new salmon feed company in collaboration with experienced partners and integrated with the world''s largest producer of salmon could open up for a profitable expansion of our value chain and contribute to the improvement of Marine Harvest''s profitability over time," commented CEO of Marine Harvest, Alf-Helge Aarskog.
Shares of Nutreco plummeted 6% after Marine Harvest announced its intentions. Nutreco''s fish feed company Skretting is Marine''s Harvest most important supplier, fulfilling an estimated 60-65% of its feed need.
In turn, Marine Harvest is Nutreco''s second-largest client accounting for fish feed sales of about EUR280 million (US$373.8 million), circa 6% of group sales and close to 20% of sales in the fish feed division.
SNS Securities estimates that Marine Harvest accounts for 7-8% of Nutreco''s group EBITA.
"The fact that Marine Harvest considers setting up its own feed company will not have a short-term effect on Nutreco, but could have important long-term effects. First, it would materially change the currently existing direct relationship between Skretting and Marine Harvest," SNS analyst Richard Withagen concluded. "Second, it means that additional feed capacity is introduced, putting prices under pressure across the global fish feed industry. Third, it puts into question the entry barriers of this market."