February 28, 2012

 

Chile's salmon sector may see better days ahead

 

 

With production recoveries and the rising price of salmon in recent months, several salmon companies in Chile have resumed talks to finalise mergers and partnerships.

 

According to available data, in the last year, there was a salmon production with similar level to the period before the crisis caused by the spread of infectious salmon anaemia (ISA) in 2007.

 

Within the salmon industry, it is expected that the industry consolidation will be achieved through the creation of about six major competitors.

 

Today, Asociación de la Industria del Salmón de Chile A.G. has 25 producers among its partners.

 

In 2011, three companies, among which was Trusal S.A., came close to merging in order to create the second largest salmon farming in Chile, after AquaChile, but the negotiation was unsuccessful.

 

Some entrepreneurs began talks with banks which have granted loans to get more flexibility to covenants that have hinder the entry of partners.

 

According to sources, one of the companies which may have advanced in a possible sale process is Trusal, whose projected sales in 2011 amounted to US$150 million.

 

Moreover, the production ranged between 27,000 and 30,000 tonnes, and a part of the firm could be sold at US$70 million.

 

The fact that the salmon companies seek to realise mergers is due to increased costs of production: at present, the production of one kilogramme of salmon requires US$2.20 investment in working capital.

 

That is, if a company wants to increase its production by 25,000 tonnes, it will have to invest about US$3,000 per tonne. Unable to get such capital from the banking sector, the salmon firms seek to sign alliances or mergers with other companies.

 

Meanwhile, AquaChile finalised its IPO, causing surprise in the salmon industry and was able to renegotiate the covenants the creditor banks had imposed on the firm.

 

In addition, industry sources admitted that Cultivos Yadrán had got into contact with its major creditors, Corpbanca, BBVA, Santander and Banco de Chile, to pay its debt.

 

According to its financial statements to December 2010, its long-term obligations with banks totalled US$59.4 million.

 

Meanwhile, Cultivos Marinos Chiloé also finalised its IPO and promised to hand over US$35 billion to banks in order to prepay its debt. The company told the Superintendence of Securities and Insurance (SVS) that it intends to set aside US$20 million for the seeding and feeding of smolts, and another US$22 million for equipment, farms and cages, among other things.