Sorry quarter for SSC
Biological challenges resulted in a very poor end to the year for the Scottish Salmon Company (SSC), in which – despite record spot prices for salmon – their average EBIT/kg was -£0.17.
The firm’s Q4 report, which was published this morning, reveals a £3.3 million increase in production costs in the quarter, due to “increased mortalities and the costs associated with biological issues”, which caused them to rise to £26.0m (Q4 2015: £22.7m). The report attributes the poor performance to “compromised growth, as a consequence of biological challenges, which resulted in losses at a number of our sites. As in Q3, fish at some sites were harvested at sub-optimal mean weights affecting overall volumes.”
As a result, harvest volumes for the quarter ended up at 5,733 tonnes, compared with 6,059 tonnes in the corresponding quarter in 2015, and – as well as the poor weights of fish – the report reveals that, in late December, “five days harvesting were lost due to wellboat issues and a period of stormy weather. In spite of mitigating steps, not all of the harvest days could be recovered further reducing available harvest volumes in the quarter.”
Equally the firm’s harvest volumes for the year fell to 24,342 tonnes (2015: 25,569 tonnes), “due to unprecedented mortalities and ongoing biological challenges” throughout 2016. Meanwhile they have dropped their forecast volume for 2017 too – in part due to one site in their north region being harvested earlier than expected, to combat health issues, and limited harvesting being brought forward into December to meet customer obligations.
This is a far cry from the 35,000 tonne “year-in-year-out” target which - in an interview with Fish Farming Expert early last year - they set themselves to achieve by 2018.
Mitigation measures
The company states that it remains “committed to finding innovative solutions to these biological challenges which will continue to impact on the salmon farming industry in 2017.”
They also intend to make a number of economic improvements – notably consolidating a number of smaller farms into a single 3,500 tonne capacity site, which will be stocked this year, to maximise economies of scale.
Q4 also saw SSC complete trials at its new harvest station in the south region, which became fully operational in January, as well as the start of a charter of a third wellboat, the Ronja Supporter. The report states that: “Together these investments will allow greater flexibility and efficiency in logistics and harvesting as well as improving speed to market, a key competitive advantage.”
Outlook
Looking ahead, SSC aims to be producing more consistent levels of its Label Rouge range, “offering further opportunities to increase overseas sales of premium salmon”. The report also states that “Our Native Hebridean Salmon also provides us with a unique competitive advantage which we will be fully exploiting in our export marketing and trade shows throughout 2017”.
Despite the company’s “long term growth strategy” they expect 2017 harvest volumes to be in the region of 25,000 tonnes.
Craig Anderson, CEO of SSC, said: “We remain firmly focused on delivering our long term growth strategy and saw a steady performance in the quarter against a challenging industry backdrop. Biological issues continued to affect the forecasted rise in volume, however, we have made good progress in treating these issues, the global salmon market is strong and prices are forecast to remain high.”
“We experienced a notable increase in sales over the festive period, demonstrating the continuing demand at home and overseas for Scottish salmon as a premium food product. New site development is an integral part of our growth strategy and continues to be a key focus.”
