Algal blooms wipe out Salmones Camanchaca profits

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Salmones Camanchaca’s losses grow.

On Wednesday, Chilean salmon farming pioneer, Salmones Camanchaca, released its results for the second quarter of 2021.

The results reflect the ongoing fallout from environmental conditions in Reñihue fjord, where a series of algal blooms and oxygen deficiencies have been dogging the company’s operations since November 2020. These environmental conditions severely affected revenues and costs as well as negatively impacting harvest weights.

As a result of these challenges, Salmones Camanchaca reports a 40 per cent decrease in the harvest volume in the second quarter of 2021 compared to the corresponding period of 2020, reaching a total volume of 6,422 tonnes, affected by a low harvest weight of 3.9 kg.

Operating margins for the company were negatively impacted by mitigation and remediation expenses associated with the Comau Fjord harmful algae bloom event of late March and early April, with extraordinary losses of US$3.1 million for Q2.

Consequently, gross margin was negative US$10.3 million, and EBITDA for the quarter ended also negative at US$10.6 million, compared with negative US$5.8 million in Q2 2020.

Operating revenue amounted to US$51 million during the quarter, in line with US$50 million in Q2 2020, while harvest costs for the quarter reached US$4.92 /kg live fish, 48 per cent higher than in the same period for the previous year.

Commenting on the performance of Salmones Camanchaca, vice chairman Ricardo García, said, “Undoubtedly, this first six months were very challenging for us because of prolonged algae’s presence in Reñihue fjord, and later an unprecedented harmful and sudden bloom in the Comau fjord. These two separate incidents have temporarily diminished Salmones Camanchaca harvest existing capacity and its sales volume, consequently affecting our financial results, which were very poor. These events mobilized the entire organization to properly confront the short-term implications, but also extract the lessons to improve our operations going forward. Starting this month of August, we expect a gradual improvement in costs and a normalization in 2022.”

Garcia continued, “Looking forward, there are favorable conditions for the Company. Firstly, in 2021 salmon markets have reacted very favorably, and demand is stronger than ever, which under a limited supply context generated prices at historic highs, and this market scenario is expected to continue in 2022. Secondly and for the coming cycles, our Company will have a more caution approach to fjords, enlarging its exposure to the XI region leveraging numerous available sea-sites. Also, our favorable experience with Pacific salmon will allow to have a larger exposure to this specie in the fjords, as they are harvested before the summer season. ”

He added, “Consequently, the fundamentals of this business remain unchanged, and Salmones Camanchaca’s capacities to adjust to environmental changes will preserve its growth plan for the coming years, when we are aiming to reach 70.000 MT of harvest, with now likely a slightly larger fraction from the XI region and the Pacific salmon. This strategic refinement will be in parallel to numerous operational improvements which will bring new technologies adapted and best practices in farming, processing and marketing. This first 6 months of 2021 has been an obvious obstacle, but hasn’t change our long term goals.”