jorgenlund’ - global aquaculture alliance...1 jorgenlund’ north’atlan1c’seafood’forum’...
TRANSCRIPT
1
Jorgen Lund North Atlan1c Seafood Forum Norway Jorgen Lund is managing director of North Atlan7c Seafood Forum A.S., organizer of the world’s largest annual business conference for top seafood execu7ves, and a consultant to Pareto Securi7es Corporate Finance in Oslo, Norway. Previously, Lund worked in the interna7onal oil and gas industry in London, New York and Norway. He holds a master’s degree from Oslo Business School and an MBA from the University of Wisconsin.
Outlook for Global Seafood Sector Expansion and Investments
2
Jorgen J. Lund
North Atlan7c Seafood Forum
Outlook for Global Seafood Sector -‐ Expansion and Investments GAA -‐ GOAL 2012 Conference Bangkok Jorgen J. Lund Managing Director North Atlan1c Seafood Forum Norway November 1st; 2012
Overview
One – Setting the stage • The views from a seafood industry observer – seen from Norway perspective
Two – Visions for the Future • World Seafood Market Outlook @ industry forecasts and investor perceptions
Three – Seafood Industry Challenges and Solutions • How to expand global seafood supply - sustainably
• Global aquaculture expansion - Capital requirements and financing
• Role of governments, private sector and capital markets
• Critical role of global seafood trade as supply expansion driver
Four –concluding remarks
NASF was started in 2005 - the 8th event will take place March 5-7, 2013 NASF - world`s largest annual seafood business conference
@ 100 speakers in 10+ seminars over 3 days NASF is a leading seafood executive Meeting Place
@ 550-600 delegates > 350+ companies > 30+ countries NASF has a global reach – business arena well recognized worldwide Norway role @ world 2. largest exporter, leading seafood financial markets
@ 20 stock-listed top seafood firms support NASF leading position FAO became a seminar partner in 2011 – making NASF a truly global arena In 2013 - NASF is moving home to Bergen – the`seafood capital`
One – Setting the stage North Atlantic Seafood Forum
North Atlan1c Seafood Forum Business and Conference PlaOorm
”Look to Norway” leading na1on in energy, shipping and seafood
2nd largest in Eu
rope
(num
bers
of com
panies)
• Oslo Børs • Energy
• 2nd largest in Europe (no. of companies)
• 2nd largest worldwide in oil service (no. of companies and market cap)
• Oslo Børs • Shipping
• Number 1 in Europe
• 3rd largest worldwide
• Oslo Børs
• Oslo Børs • Seafood
• Number 1
Worldwide
• (no. of companies and market cap)
5
7
11
1516 16
1819
0
2
4
6
8
10
12
14
16
18
20
2004 2005 2006 2007 2008 2009 2010 2011e
# of listed
seafood
com
panies at Oslo Bø
rsSignificant number of seafood companies listed at Oslo Børs
Source: Oslo Børs, Pareto
# of listed seafood shares at Oslo Stock Exchange (Oslo Børs): 2004-‐2011
1,479
115 75 54 47 42 34 31 4 30
200
400
600
800
1,000
1,200
1,400
1,600
Thai Union Frozen
Products PCL
Eternal Energy PCL
Seafresh Industry PCL
Surapon Foods PCL
Asian Seafoods
Coldstorage PCL
Kiang Huat Sea Gull Trading
Frozen Food PCL
Thailuxe Enterprises
PCL
Pakfood PCL Tropical Canning (Thailand)
PCL
Trang Seafood
Products PCL
Oslo -‐ the most a[rac1ve stock exchange for fishing companies Market cap fishing shares: Oslo vs. selected ”fish” stock exchanges ILLUSTRATIVE
Market cap fishing shares Thailand (USDm)
Market cap fishing shares Oslo Børs (USDm)
Mcap fish shares Singapore SE (USDm)
1,404
643
461
43 20
200
400
600
800
1,000
1,200
1,400
1,600
China Fishery Group Ltd.
Pacific Andes Resources
Development Ltd.
Oceanus Group Ltd.
Qian Hu Corp. Ltd.
Ocean International Holdings Ltd.
Source: Oslo Børs, Pareto
Two – Visions for the Future
1. Seafood Market Outlook @ OECD and FAO July 2012
2. The views from the world leading Capital Markets
What do investors «see and believe in» - today ?
0
5
10
15
20
25
30
35
40
45
50
1965 1980 2005 2030
Per
cap
ita fo
od s
uppl
y (k
g)
0
1
2
3
4
5
6
7
8
9
Pop
ulat
ion
(bill
ions
)
Meat concumption
Fish consumption
World population (UN)
Source: FAO
Main Drivers: Popula1on Growth vs. Food supply
Popula1on growth will increase demand for energy, water – and food !
The increasing demand for healthy proteins will drive seafood growth Solid long term drivers for the next decades Demographics support higher demand for proteins
Source: Nutreco, FAO, Pareto Securi7es
2,000
2,200
2,400
2,600
2,800
3,000
3,200
3,400
3,600
1965 1975 1985 1998 2015e 2030e
World Industrialized Developing
0%
5%
10%
15%
20%
25%
30%
35%
1965 1975 1985 1998
Industrialized Developing
World per capita kcal intake is increasing…
….as well as animal protein share
Aquaculture is a sustainable growth story
Marine fishery resources are scarce/not expanding Demand must be supplied by aquaculture
• Future demand growth will be a function of increase in per capita consumption and growth in global population
• FAO estimates global demand for fish for human consumption to double in 2030
0
20
40
60
80
100
120
140
160
180
1950 1960 1970 1980 1990 2000
Aquaculture Capture
Production (million tonnes)
Highly compe11ve feed conversion rate (FCR) – (x) Demand is to be met by Aquaculture produc1on
0
1
2
3
4
5
6
7
8
Red meat Pig Chicken Salmon
• Feed conversion rate is the amount of feed needed to produce the same amount of meat
• Salmon has a FCR of 1.3x
• Chicken has a FCR of 2x
• Red meat has a FCR of 7x
Projected growth of capture fisheries vs. aquaculture OECD/FAO forecast July 2012
• Total produc7on projected to reach 172 million tons by 2021
• Growth of 15% above the average level for 2009–11.
• Over next decade – aquaculture rises by 33%
– capture fisheries grows only 3%
Million tonnes
Three – Challenges and Solutions
• How to meet global fisheries and aquaculture supply gap in a sustainable way?
• 3 questions: Where ? – How Much (Costs)? - Who (will do it)?
• Capital requirements/financing of global aquaculture expansion
• Vital role of private sector and capital markets
• Required role of Governments - the need for stable policies and predictable long-term concessions and operating conditions
• Critical role of global seafood trade as driver for supply expansion
Global seafood supply expansion @ How to finance supply gap -‐ need for capital funding @ Private sector -‐ key to facilitate new investments and provide risk capital
OECD-‐FAO forecast to 2021 • Foresees 15 % demand growth to
172 million tons by 2021 • Supply Gap of 16 million tons
– Aquaculture sector main supplier -‐ expanding 33 % by 2021
– China to account for 61 %, rest Asia 28 %, rest world only 11 %
• Role of China/Asia vital to meet new demands
• Seafood sector – more globalized • World trade to expand
Ques1on of capital funding We envision global capital requirements
~ USD 40-‐50 billion by 2021 • China share: USD 25-‐30 billion
to be funded internally in China • Other world: USD 20-‐25 billion • Salmon sector – may need USD 5-‐8 BN By 2030: USD 100 -‐ 130 billion? for new aquaculture project investments FAO: Supply Gap ~ 50 million tons/2030?
Financial – working capital requirements @ 2 years+ fish farming (1me to reach harvestable sizes)
Biological Risks: Health risks: The fish is exposed to health risk from pests, disease and toxins.
Environmental risk: Risk of product quality and traceability:
Commercial risks PRICES : Risk of changes in input prices -‐ Interna1onal price trends:
DEMAND: Changes in consump1on : Changes in the economy of the consumer countries: Behavior of the global and na1onal economy, Changes in condi1ons -‐ affect the global demand for protein and salmon
Currency Risk + Liquidity risk: salmon price vola1lity, raw material costs , credit risks/customer payments
Governmental Policy Risks Changes in legisla1on (aquaculture and farm site concessions policies) and related risks
Global aquaculture expansion - Key Private Sector Risk Factors
10
15
20
25
30
35
40
Q1 95 Q1 97 Q1 99 Q1 01 Q1 03 Q1 05 Q1 07 Q1 09 Q1 11
Quarterly weighted average salmon spot price (NOK/kg)
19
Market risks -‐ Salmon is a highly vola1le commodity market
Source: FHL/NOS, Pareto Securi7es.
- 10
- 5
0
5
10
15
20
25
30
- 5
0
5
10
15
20
25
30
35
40
12e 2011
2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
Salmon firms: A[rac1ve return on capital through the cycle…
EBIT-‐margin (LHS) Salmon spot price (RHS) ROCE (LHS)
Disease break-‐out resulted in collapse in produc1on in Chile ’08-‐’09 causing early turn of cycle
The industry in Norway un-‐successfully tried to improve prices by freezing large quan11es of salmon referred to as ”lakseberget”.
Minimum price of 3.11 EUR/kg by EU as an1-‐dumping measure, later repealed (2009) ater WTO-‐ruling
Peak-‐to-‐peak ROCE between 12 and 17% last 3 cycles
Return on capital employed: example – return on assets in salmon farming Norway, %
The role of Governments: the need for stable policies and predictable long-term concessions and operating conditions
”The legal concessions frame-‐work must be right” Key parameters include: 1. Legal frame work must be in place -‐ and give solid predictability 2. Farming Concessions must be long term -‐ minimum 20 years dura7on 3. Concessions must be transferable 4. The concession alloca7on, award and approval process must be transparent 5. Sustainable planning of how areas are used (ref ILA problem in Chile) 6. Control and compliance 7. Government support …………………….. ”Salmon majors to date -‐ cau8ous to enter into new areas and species -‐ focus today on buying
companies rather than undertake grass-‐root development projects”
Role and value-added of the private seafood sector
• Benefits of involving larger international fisheries and seafood companies – to meet the expected future seafood supply gap:
• These large seafood firms are in general sustainable
• Most are stock-listed or large operators – subject to scrutiny from investors, analysts, lenders, regulators, NGOs and other stakeholders
• They have high competence and know-how as operators - with very skilled organizations and managers
• They can bring knowledge and expertise into JVs with local firms or government institutions
• They will bring international market access and market know how
• They have access to capital markets and project funding
• Larger international fishing companies will - in time - diversify into aquaculture sector
Salmon farming is a high-tech industry Salmon Majors - Controlling the entire value chain
Broodstock Fresh water Farm site concessions
Processing plants
Market strength
• Focused on value added products
• Market Diversity: U.S., Japan, Europe, BRIC, other markets
• Market Access -‐ sales network worldwide
• Brand developments
• Salmon Majors are global -‐ and have mul1-‐task competence
• Companies have huge technical insights and know-‐how in all facets of salmon farming, processing and sales & marke1ng
• Controlling en1re value chain minimizes risks -‐ op1mizes costs and streamlines opera1ons, giving best chances for profitable business
• One major advantage is these firms` ability and capability to handle risks and mi1gate problems including large-‐scale incidents
• Sustainability is of cri1cal importance in all parts of opera1ons
Capital Markets – funding for future expansion
• Global capital markets and investors much interest today in sector to provide
investments and project funding – if framework condi1ons are OK
• New capital can be raised via IPOs, private placements, bonds, syndicated bank lending, private equity firms or by other means
• Governments, World Bank/IFC and other mul1-‐government bodies should consider providing some project financing -‐ sharing some project risks
• Norway -‐ an important global capital market for private sector seafood industry and project development funding
• Host government role as facilitator and regulator is a cri1cal factor for foreign capital investments to encourage new aquaculture projects
• Policies to favor private sector development and foreign JVs
• Grant incen1ves in R&D and financial support at a[rac1ve funding costs
• Favorable tax regimes and other incen1ve schemes
• Provide land and infrastructure support
The critical role of world seafood trade
The global seafood and fisheries trade is Big Business ! • Seafood is one of the most widely traded commodi1es in the world:
@ today -‐ 57 million tons or ~ USD 125 billion in value terms per year
@ Forecast: 65 million tons by 2021 – ( and 75 million by 2030?)
Role of global seafood trade:
@ a major role as income generator + contributor to economic growth, food supplies and employment
@ fosters global coopera7on, opportuni7es for partnerships, JVs, transfer of vital know-‐how, R&D as well as capital investments
@ increasingly important as a contributor to global supply expansion
UN Rio+20 Food security issue New interna1onal trade and policy dimension:
«Seafood in a new geopolitical role»
26
Outlook:
@ OECD/FAO forecast: demand 2021 to expand by 16 mill tons 50 mill by 2030? @ Required Investments : USD 40-50 billion by 2021 USD 100-130 billion by 2030?
Strategies for securing new global seafood supplies: 1. Large interna1onal fisheries and aquaculture companies -‐ and major technical suppliers -‐
will be excellent partners with governments/local firms to make new required seafood supply expansion viable...
– will provide know how, knowledge transfer, market access, and risk capital -‐ making this supply expansion viable without jeopardizing na1onal budgets...
2. Host governments will benefit from engaging 1st class interna1onal seafood firms in win-‐win joint ventures and other partnership types -‐ when developing larger aquaculture projects...
3. Governments : provide incen1ves to seafood firms and global investors willing to make capital funding for seafood and aquaculture projects > and provide acceptable regulatory framework condi1ons
Four: Concluding Remarks
Visions for the future of global aquaculture Tilapia is smart farming -‐ Feeding the world -‐ Saving the Oceans
Many thanks for your a[en1on !