Page 39 - bne_newspaper_February_02_2018

bne February 2018 Cover story I 39
As a perishable product, being able to get the product to market fast is a big advantage even before transport costs are considered.
“Maintaining your market share is
more important than meeting the cost of transport,” says Sosnov. “We have invested in Russian production and so we have to make a lot of effort to get and maintain our market share in Russia.”
The market is fickle, because of the extremely international nature of the business. The Scandinavian countries produce far more fish than they can con- sume so the entire business is a transit business from the start. That has lead
Tri Ruchya has modern, high-quality equipment to process up to 25,000 tonnes of red salmon per year, as well as a refrigerated warehouse and devel- oped infrastructure, and is conveniently located on transport routes near the company’s new and existing farms.
Russia Aquaculture has also bought two small plants in Norway that produce the smolt, the baby salmon that grow
Dynamic of global prices of salmonids, EUR/kg
4.5
in fresh water and then are transferred to the cages in Murmansk when they are big enough.
“Ours is a growth story. Russia is one of the single largest fish markets in the world and one of the few with potential for growth as most of the other markets are already saturated,” says Sosnov. “We’ll be growing for many years
to come.”
+86%
4.7
6.5
to a commoditisation of prices. Even Russian Aquaculture’s unusual focus on its domestic market is affected, as all its competition is imported.
“When the dollar was appreciating then consumption went down as the price of salmon went up,” says Sosnov. “Salmon is a soft commodity and so the price is set by the global markets. Even our pric- es are linked to the global market. The guys who produce salmon in the Faroe Islands have to ship their fish anyway so they look around the world to see where prices are best and send them there. Changes anywhere affect everywhere.”
Russian Aquaculture has ambitious plans and has already tapped the mar- kets twice to raise capital. In the most recent round the company finished an SPO of new ordinary shares on the Mos- cow Exchange on December 11, placing 8.3mn of new shares to raise a total of RUB1bn ($17mn).
The SPO was carried out at RUB120 per share, making the company's market capitalisation of RUB10.5bn. After the SPO the free float of Russian Aquacul- ture is 9% of share capital, while the largest shareholder Maxim Vorobyov now owns 47.1%.
As part of its expansion plans, in November the company acquired an option to purchase a 40% equity stake in Tri Ruchya, a primary fish-processing company in the Murmansk region, the company announced on November 17.
4.5
4.7
3.8
4.0
3.5
3.5
2008 2009 2010 2011
2012 2013 2014
2015 2016
Aquaculture companies' EBITDA margins for 2016, %
Bakkafrost (Faroe Islands) Russian Aquaculture (Russia)
Salmar (Norway) Marine Harvest (Norway) Oceana Group (Norway) Leroy Seafood (Norway) Empresas (Chile) Blumar (Australia) Grieg Seafood (South Africa) Norway Royal Salmon (Norway) Huon Aquaculture (Chile) Schanghai Kaichuang (Norway) AKVA Group (China)
56% 41%
38%
31%
28%
28% 23%
22%
21%
17% 11%
% -3%
0%
9
2nd globally in terms of EBITDA margin
10%
20% 30% 40%
50% 60%
www.bne.eu