Marine Harvest Chief Says Salmon Supply Squeeze Will Persist

By Meera Bhatia

Aug. 20 (Bloomberg) -- Marine Harvest ASA, the world’s largest salmon farmer, expects supply to fall short of demand as Chile’s output will take as many as six years to return to levels seen before a virus ravaged its fish farms.

“It will take long for Chile to come back to volumes they used to have,” Chief Executive Officer Aase Aulie Michelet, 56, said in an interview yesterday at the company’s headquarters in Oslo. “We will be undersupplied for a while.”

Salmon export prices from Norway, the biggest supplier ahead of Chile and the U.K., climbed 13 percent this year on a growing world shortage. Global supply is estimated to slump 10.3 percent to 1.3 million metric tons this year after an outbreak of the Infectious Salmon Anemia virus at Chilean farms, according to industry consultant Kontali Analyse AS.

Marine Harvest plans to increase investment in technology, research and development to better understand diseases, the chief executive said. Similar outbreaks in 1970s and 1990s also hurt the industry, which traces its origins to commercial salmon farms in Scotland and Norway in the 1960s.

“The winners will be those who can improve fish health,” Aulie Michelet, whose company was formed in 2006 through the merger of three salmon producers, said. She said she’d “welcome” consolidation to better prevent disease.

Supply Squeeze

Salmon supply has risen about 55 percent this decade, according to Kontali Analyse, in part as health-conscious consumers eat more salmon. Demand has also risen as increased cultivation has driven down prices relative to other foods such as beef and chicken, according to Marine Harvest.

While the company has benefited from the supply squeeze, it was forced to take a $115 million charge in the second quarter for its unit in Chile and has cut its workforce in the country 67 percent to about 1,600 workers. Chile had accounted for 23 percent of its total output.

It plans to further reduce its workforce in Chile “substantially,” the CEO said, adding that it will be in 2014 or 2015 before volumes return to earlier levels. Global volumes will drop 8 percent to 13 percent in second half, she said, adding that she’s “quite positive for the next quarters.”

The company is sending more Norwegian salmon to the U.S, where it set up a processing plant in Miami and will open a plant in Los Angeles to take advantage of the Chilean shortfall.

Quarter Loss

Marine Harvest last week reported a second-quarter loss of 66.1 million kroner, compared with a profit of 22.4 million kroner a year earlier. It had an operating loss in Chile of 380 million kroner, while profit in Norway more than doubled to 393 million kroner. It plans to harvest 313,000 metric tons this year, down from 327,000 tons last year.

The company’s shares have more than tripled in value this year after plunging 70 percent last year.

Marine Harvest is seeking to grow “gradually” in Norway and to expand in Asia by marketing, sales and “other options,” the chief executive said. The strategy doesn’t include investing in more assets in Chile, she said.

“I believe in balanced growth -- say 5 percent year by year,” she said. “If that was the increase over time I think this would be a well developed market.”

The company was formed in 2006 after Marine Harvest’s fish- farming unit was merged with Norway’s Pan Fish ASA and Fjord Seafood ASA, a transaction organized by the company’s main owner, shipping billionaire John Fredriksen.

Michelet has an M.Sc.Pharmacy from University of Oslo and held positions including president of GE Healthcare AS (Norway) before joining Marine Harvest in March last year.

To contact the reporter on this story: Meera Bhatia in Oslo at mbhatia2@bloomberg.net.