Salmon farm. (Photo: Mainstream)
Financial institutions restrict loans to salmon firms
Tuesday, December 18, 2012, 23:30 (GMT + 9)
Given the serious financial situation faced by the salmon industry, banks in Chile are assessing a possible limitation on loans for companies in the sector, which would be only for working capital. In addition, they would demand more guarantees than usual.
Several sources of the financial system and of the aquaculture industry itself have explained that these measures reflect the current risk level of the sector, considering its low payment capacity.
As a result, banks have to provision up to 40 per cent of the borrowed money, with charges to the month’s profits, reported Economía y Negocios.
In this context, banks have decided to demand more payment guarantees, including property and others associated to money orders that do not belong to the salmon sector.
A senior financial executive recognized that following the restructuring of the sector and the support provided for stocking, "the producers’ aggressive level affected prices and today the industry is having negative margins."
But banks now take precautions before providing funding: they control the debt structures and the capital and limit loans to no more than one year to ensure the payments.
Meanwhile, the sector is facing problems related to salmon prices, supply and demand.
According to the data provided by the international consulting firm Urner Barry, the national salmon fillet changed from a price of USD 3.6 per pound in early 2012 to USD 2.8 in mid-September. That same fillet in 2011 was worth slightly less than USD 6 a pound.
In addition, a report issued by Kontail Analyse indicates that in 2011 the country exported 221,000 tonnes of Atlantic salmon, and this year, the exports have reached 376,000 tonnes.
Anyway, Valeria Mutis, from Rabobank, anticipated that for 2013 " the rate of supply growth is expected to decrease, therefore prices should tend to recover a bit."
The lack of loans is leading to mergers and restructuring of some companies.
"This industry should aim at concentration to keep growing," a businessperson in the financial sector told Economía y Negocios.
For example, the Norwegian company Cermaq acquired Cultivos Marinos Chiloé for USD 110 million; and the salmon firm Friosur SA agreed to pay USD 36 million to acquire the aquaculture division Pesquera Landes SA (Landes Fish Farming), last September.
The general manager of Banco de Chile, Arturo Tagle, argues that the industry must realize "that it has to be strictly managed."
And Manuel Olivares, BBVA general manager, thinks that it is still necessary to achieve "an adequate capitalization of this industry."
Meanwhile, general manager of BCI, Lionel Olavarria, believes that the current biggest concern is the exchange rate.
- A difficult 2013 forecast for salmon firms
- Cermaq to acquire all shares in Chilean farming firm
- Friosur bought Pesquera Landes aquaculture division
By Analia Murias
Photo Courtesy of FIS Member Mainstream Chile S.A.