Scottish Sea Farms and Hjaltland buy No Catch sea farming sites
10 April, 2008 -
SCOTTISH Sea Farms has in consortium with Hjaltland Seafarms UK agreed on acquiring salmon farming facilities from the joint administrators of Shetland-based No Catch, it was announced today. No Catch, the UK's first and only producer of organic farmed cod, ran out of cash on February 20, with debts amounting to almost £41 million. Scottish Sea Farms and Hjatland Seafarms already have extensive operations in the Shetland Islands. Both are owned by Norwegian parent companies. Leroy Seafood Group ASA and SalMar ASA own 50% of Scottish Sea Farms Ltd respectively through Norskott Havbruk AS. Hjaltland Seafarms UK Ltd is fully owned by Grieg Seafood ASA. A statement issued by Leroy Seafood Group today said the acquired assets do not change Scottish Sea Farms' forecasted harvest-volume for 2008. "The acquired assets will lead to better biological conditions for Scottish Sea Farms' current operations in the Shetland area, as well as improving Scottish Sea Farms' potential for increased harvest volumes in the future," it said. Grieg Seafood Hjaltland, the largest salmon farming and processing company in Shetland, said that it has acquired farm assets including barges, boats and cages, as well as a farm with organic salmon certified by the Organic Food Federation, plus several farm licences, at a disclosed sum of £3.6 million. Grieg Seafood’s chief executive officer, Per Grieg, said: “We are very pleased to have completed the purchase... The seven farm licences will increase our production capacity and flexibility for an even more consumer-tailored salmon production in the coming years. “Four of the sites – Swining Voe 1, Swining Voe 2, Swining Voe 3, and North Voe Whalsay - will be highly beneficial to Grieg Seafood Hjaltland from a strategic point of view as these are all located on the east side of Shetland where the company already has a significant operation. “With organic salmon already being grown on one of the sites, Hjaltland Seafarms will now be in a position to offer continuous supply of organic salmon in 2008 and thereafter under its organic brand WildWater – Farmed in the Wild. This will make us the world's largest producer of organic salmon. The sales will be handled by our sales and marketing company, Shetland Products.” Grieg Seafood Hjaltland Group already produces over one third and processes over 50 per cent of Shetland’s total salmon production. This latest acquisition will increase the company’s farm site production capacity, but will not increase the harvest guidance for 2008 which will remain at about 16,000 tonnes. The company is forecasting an increase in harvesting to about 20,000 tonnes gutted weight by 2010. Hjaltland Seafarms’ managing director Michael Stark added: "The additional farm sites and harvest volume of organic salmon in 2008 will strengthen Hjaltland’s market position as the leading producer of high quality sustainable and organic salmon from Shetland.” Hjaltland’s processing company, Lerwick Fish Traders, will in turn directly benefit from increased farm production through increased processing volumes of primary, secondary and soon value-added products, he said. The Grieg Seafood Hjaltland Group is in the final stage of constructing the processing plant in Lerwick where it will start producing smoked and cured salmon as well as finished or semi-finished products within the second quarter of 2008. Commenting on the sale, joint administrators Daniel Smith and Robert Caven said they will continue to occupy certain of the sea farm sites off the Shetland Islands under licence whilst they trade out or seek a buyer for the current stock of cod, which once mature will comprise of around 3,400 tonnes. Licences on some of the sites extend to some 13 months, whilst the stock matures ready for harvesting. In addition, the administrators are continuing to pursue the sale of the mussel sites, trout business and Grading Systems business, which is profitable and operates as a specialist mass live fish grading business. The joint administrators are also continuing to hold discussions on the potential sale of the hatchery business, which contains much of the intellectual property pertaining to the successful rearing of organic cod. The processing plant in Scalloway continues to operate, albeit at a reduced level as the administrators are offering a head-on gutted product for sale to wholesalers rather than a filleted product. Daniel Smith of Grant Thornton commented: “We believe that Scottish Seafarms and Hjatland UK Farms Limited will utilise the farming sites for their very successful and highly profitable salmon farming businesses. In the long run this should create sustainable employment in the sea farming sector for the Shetland Islands and continue to enhance the Islands’ reputation as a centre of expertise for farmed fish."
The shareholders and directors of No Catch embarked on a very ambitious business plan from the outset, not only endeavouring to commercially farm cod on a scale not previously seen in the British Isles, they chose to produce organic cod. This increased the feed cost by 15% - 20%, reduced the permissible density level of the fish, and restricted the availability of permitted vaccines, according to the administrators. "In addition, the management's business plan required the development of the "No Catch" brand, refusing to supply the multiple retailers with own label produce which would have been particularly useful in increasing volumes," Mr Smith said. "No Catch’s production costs (pre mark-up) were more than double the current market auction prices for wild cod/HOG at less than £3 per kilo. The consumer is not yet prepared to pay such a large premium to wild cod." Cod production is in its infancy with a great deal still to be learnt about the life cycle of the cod within the habitat of the waters off the Shetland Islands. "Only with a better understanding from further investment can the cost of production be reduced; requiring improved knowledge of growth curves and related feed costs; reducing mortality rates; avoiding loss of biomass caused by spawning; and improving yields from processing." With the increasing shortage in availability of wild cod it is expected that in the long-run the price of cod will rise. "Taken together with an improved efficiency in cod farming techniques the viability of the industry could be secured in the future. The salmon farming industry went through similar growing pains 25 years ago," Mr Smith concluded.
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