Salmones Camanchaca vice president Ricardo García is optimistic about the rocky road ahead.
García who leads the Chilean-Oslo listed salmon farmer is drawing experience from another crisis to fight the pandemic. “I led a prime group of managers in 14 Latam countries to overcome a major financial crisis in the US, and we recovered quickly,” he told SalmonBusiness.
Analysts are mulling over the economic recovery of the pandemic, which some say will pale in comparison to the Great Recession of 2007. For example, the FT reported that the Bank of England forecasted that the coronavirus crisis will push the UK economy into its deepest recession in 300 years, its worst since 1706.
The wider industry is up against it, but Salmones Camanchaca is well-positioned to emerge stronger from the pandemic, said García.
“I believe that if you have a solid business model based on true competitive advantages in producing a much needed product, and you can run it with a team of prime managers and leaders in their respective functions, you end up any crisis stronger than before if you stay still, put, focus and very determined in your goal,” he elaborated.
Like many others, the company is all too feeling the bite of the pandemic, after it posted a bruising 24.2 per cent decrease in EBIT in its Q1 results last month. “Salmon farming is about bringing to consumer one of the most nutritious and sustainable protein, and Covid will not change that,” explained García adding: “On the contrary, it will end up strengthening the need for healthy food, and I believe demand will recover stronger than most of the sectors. On the supply side, we have proven to be part of the “essential industries”, protein, that can run safely, leveraging years of the highest standards in term of hygienic and clean conditions of our plants, as we deal with people’s food”.
Not only facing a pandemic, Chilean salmon farmers faced even more headaches as workers and residents took to the streets against what they saw were insufficient measures against the virus. While that particular crisis has seemed to have calmed, many more hurdles lie ahead. For example on Monday, the second-largest airline in Latin America Avianca filed for bankruptcy. If others, that are more important to the salmon export industry also fall, that could cause major issues in exports with the US.
How long do you think the disruption will go on for?
“On the supply side, we have adjusted our processes and protocols in a matter of days and few weeks, and we are now capable of run at full capacity if needed, with our employees as safe in our facilities as they are at home,” answers Garcia.
“On the demand side, we’ve lost a large fraction of the food service demand, but retailers are growing faster than ever, helped by on-line orders; net, the demand is weak but I believe we are seeing the bottom of it.
“It’s going to be June or at most July when we will see demand growing. How long will it take to be at the same level as late 2019 or early 2020? I believe first half of 2021,” he said.
65-75% harvesting capacity
The vice president said that the company was still maintaining lower production capacity but that it was prepared to go to full and was flexible in moving from one market to another, or from one format to others.
“We are running at around 65-75 per cent harvesting capacity compared with our plans, but our value-added plant is operating at full in fillets and portions capacity. Depending on market conditions, harvest capacity can reach 100% of previous plan”.
Fillets & portions are 79% of total volume processed. “We are selling only value added globally. HON formats are normally the first ones to absorb the demand/supply impact, but are also the first to recover when demand recovers,” maintained Garcia.
Salmones Camanchaca does not have a large frozen inventory in Chile or outside, he revealed, however: “Chile has a larger capacity to have frozen inventory than other markets, but in our case, there is no abnormal levels”.
What’s are you hopes for the future? With meat production down in the US, is this potentially a huge opportunity for Chilean salmon?
“I think supply disruptions of competing proteins are temporarily, and will not create major opportunities for salmon. But I do believe that healthier and more sustainable food with be in great demand, and the winning proteins are seafood, and salmon within seafood. People will be more health sensible in the next years,” he concluded.