The salmon farming company has had to adapt operations in response to the public health crisis. Even so, it has kept its commitment to advance toward carbon neutral production.
The last two years have been quite eventful for Salmones Camanchaca. In February 2018, the company began trading on Santiago Exchange (Chile) and the Oslo Stock Exchange (Norway). The process, which has been a positive experience, prompted the company to improve control systems, transparency and communication regarding their processes.
Last year, the company announced its plans to advance toward carbon neutral production, beginning the hard work that we expect will greatly improve the efficiency and sustainability of the operation. Most recently, in April 2020, Salmones Camanchaca also communicated that it would no longer participate in New World Currents—a marketing organization that sells Chilean salmon in China—as it plans to use its own capabilities to penetrate the market more deeply.
Behind all of this is Chief Executive Officer Manuel Arriagada, who has a degree in civil engineering from Universidad Católica de Chile and vast experience in the salmon industry. In an interview with AQUA, the executive discussed the developments in recent months, the impact of COVID-19 and the company’s plans to continue making progress on carbon neutrality. He also announced the new Salmones Camanchaca objectives related to digital transformation, efficiency throughout the value chain and developing a diversified product and market portfolio.
Salmones Camanchaca reported an increase of 12.5% in revenue for the first quarter of 2020 despite lower sales prices. What is your analysis of these first months of the year? How strong of an impact has the pandemic had on Salmones Camanchaca?
In the first quarter, sales revenue was 12.5% higher than in the same period last year, despite lower prices, primarily thanks to a larger harvest and additional sales volumes. COVID-19 did not have a great impact as the effects only began to be felt in the last half of March. There was no major repercussion in prices in the first quarter because the main customers and destination markets, like the United States, Mexico, Brazil and Russia, did not see a rise in positive cases until the end of March. In Chile, the first public health measures were implemented in the second half of March, causing certain temporary disruptions in the logistics chain, especially on the island of Chiloé (Los Lagos Region).
Beyond financial results, how has the public health crisis modified operations at Salmones Camanchaca? What changes have you had to make?
Production operations have been modified as a result of all the measures implemented in response to the public health crisis. Once it began, we adopted strict heath measures at our facilities to protect the health of each employee as well as the communities where we operate. We established work, transportation and meeting protocols and reduced employee density at our production plants. We modified shifts, implemented telecommuting and took other actions as well. For example, we were the first company to proactively administer CRP tests for COVID-19 to employees, which is an ongoing, systematic effort.
We have harnessed and applied all our knowledge and experience in biosafety to face this pandemic. Likewise, product and customer types have shifted, as retail and supermarket sales progressively increase and sales to the restaurant and hotel sector decrease. Production of value-added products, especially frozen portions, has also risen. Post-pandemic, we will try to maintain all the operating methods that have proven efficient during this time, for example, process automation, digital initiatives and, where applicable, telecommuting.
Salmones Camanchaca has been listed on the Santiago and Oslo stock exchanges for a couple of years now. What is your take away?
Being publicly listed in Chile and Norway has been very positive. Being a publicly traded company brings great challenges and benefits. It requires strict control systems, rigorousness, transparency, timely reporting and implementing best practices in corporate governance. It also facilitates access to the capitals market and improves visibility and publicity for the company. Particularly, trading on the Oslo Stock Exchange—the world’s leading seafood market—facilitates access to and participation in the Norwegian salmon cluster, including suppliers, research and development projects and a specialized analyst community. We certainly plan to maintain this path in the future.
Last year, Salmones Camanchaca announced its plans to advance toward carbon neutral production. How far along is that effort? Has work on that area continued despite the pandemic?
Sustainability is one of our company’s three priority areas of value creation. The other two are organic, efficient production growth and focused market development. Our goal of becoming carbon neutral certainly remains in effect and we are making progress toward it.
One of the milestones on our road map is related to converting all of our electricity consumption (which represents 13% of our GHG emissions) to renewable sources. We have just completed the tendering process and have awarded the power purchase agreement to Colbún beginning in 2022. This will reduce our emissions for this item and bring significant cost savings. We believe that sustainability is good for business and that the pandemic must strengthen our commitment to sustainability. Now, more than ever, we need our companies to contribute to building a better future.
Will becoming carbon neutral involve a large upfront investment? Could that investment be offset later through reduced operating costs?
Our path toward carbon neutrality requires some, but not large, investments and cutting emissions will also result in cost reductions. In general terms, we plan to reduce emissions and expect costs to be equal to or below current levels.
Today the Chilean salmon industry, in general, is betting on more sustainable production. What do you think will continue to be the primary environmental challenges for the industry?
In structural terms, it is very important for companies to incorporate sustainability throughout all operations; have a clear strategy and a well-executed, prioritized materiality analysis; set goals and establish KPIs to measure progress.
In terms of specific challenges, we certainly need to make progress on reducing antibiotic use and moving toward a circular economy. We need to measure and trace waste generation and implement reduction strategies. Each year, 8 million tons of plastic are thrown into the ocean, practically all of it from land. We must work to not contribute even a single kilogram to that total.
The Chilean (and global) salmon industry is currently going through a complex time in terms of markets as a result of COVID-19. What is your projection? Do you think it is possible to increase demand or prices in the coming months?
The impact of COVID-19 has, in fact, caused an initial decrease in the price of salmon because approximately 50% of global salmon consumption occurs in the HoReCa (hotels, restaurants and catering) sector, where demand has been greatly impacted. While this decrease has been partially offset by demand from the retail sector, since global export volume for salmon in Norway and Chile has not fallen (both countries have managed to maintain production and logistics), we have seen a natural drop in prices.
As the HoReCa sector gradually reopens, which is just beginning in Europe, we have seen price increases, especially for Norwegian salmon, the majority of which is sold on that market. Thus, as the main markets for Chilean salmon begin to reopen their hotels and restaurants, we expect prices to recover similarly. In the last two weeks (end of June), we have seen part of that effect, especially in the United States.
Elsewhere, China has been showing signs of recovery. However, there was great commotion a couple of weeks ago when imported salmon at a Beijing market was tied to possibly spreading the virus. Do you think that will have repercussions?
Chinese health authorities have been clear that there is no relationship between imported salmon and spreading the virus. This technical opinion is shared by Chilean health authorities and science, in general. In fact, the FAO has explicitly stated that there is no evidence that any virus causing respiratory illness can be transmitted through food.
What are Salmones Camanchaca’s medium and long-term plans? Do you plan to continue growing? Are there acquisition or merger options?
We have an organic growth plan based on the production capacity of our aquaculture concessions, through which we expect to exceed 60,000 tons of Atlantic salmon, in addition to Coho salmon and growing our trout partnership. Other key objectives beyond growing in volume include making progress on a company-wide sustainability strategy, implementing a revolutionary digital transformation project, increasing efficiency throughout the value chain and developing a diversified product and market portfolio.