Study seminar Dirdal, May 2013
We have reduced marine ingredients by half in 7 years Average Inclusion in EWOS AS Feeds 70% Fishmeal Fishoil 60% 50% 40% 30% 20% 10% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2
Tonnes Enabling us to produce more feed without using more marine ingredients Million 1,4 Fishmeal Fishoil EWOS Feed 1,2 1,0 0,8 0,6 0,4 0,2 0,0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 3
So why Copeinca? 4 4
Areas for value creation IMPROVING QUALITY AND PERFORMANCE OF FISHMEAL AND FISHOIL PRODUCTS SECURING ACCESS TO SCARCE RESOURCES NOKm 250-270 FINANCIAL COMMERCIAL AND LOGISTICS REFORM 5
Operational areas for value creation SECURING ACCESS TO SCARCE RESOURCES IMPROVING QUALITY AND PERFORMANCE OF FISHMEAL AND FISHOIL PRODUCTS NOKm 190-20 COMMERCIAL AND LOGISTICS REFORM 6
Salmonid feed consumption has increased, fish oil availability has not World Fish Body Oil Production (Tonnes) Million Million Salmonid Feed Consumption (Tonnes) Fish Body Oil Production 1,2 Salmonid Feed Consumption 3,4 1 0,8 0,6 0,4 0,2 0 3,2 3 2,8 2,6 2,4 2,2 2 Sources: IFFO, Kontali 7
The nutritional value of fish oil varies enormously between species EPA+DHA (% of oil) Digestibility 30% 25% 20% 15% 10% 5% 0% EPA/DHA Digestibility 98% 96% 94% 92% 90% 88% 86% 84% 82% 80% 8
Therefore we can quantify the relative value of different oil types 2,40 Oil Value Index 2,20 2,00 1,80 1,60 1,40 1,20 1,00 Rape A B C D E F G H I 9
Fish oil supply and demand next 10 years Fish oil supply (1 million tons) Global fish oil with assumed 20% EPA+DHA of total FA in salmonid feed with 31% added oil containing 7.5, 5 and 3% EPA+DHA of total FA in feed. Future demand for fish oil based on 2010 reported fish oil use (IFFO) and projected growth rates in salmonid feed (3.6% per year) and omega-3 industry (10% per year) from previous slides. Projected growth of marine fish (5% per year) and marine crustacean (6% per year) aquaculture from FAO data also factored in while freshwater aquaculture and other segments use of fish oil considered static. 10
EPA+DHA: Estimates feed to fish 7.5% 1-1.4 g/100 g EPA + DHA in fillet 5% 0.7-1.0 g/100 g EPA + DHA in fillet 3% 0.5-0.8 g/100g EPA + DHA in fillet * %EPA + DHA/ fat in feed Fish estimates from feed companies (Norway) 11
Eating salmon and meeting recommended weekly intake of EPA + DHA* EPA + DHA fat in feed 7.5% 5% 1 to 2 2 to 4 3% 3 to 5 No. of portions of salmon/week * Based on recommendation of 250 to 500 mg/ day 12
Copeinca fish oil can cover EWOS needs in a crisis Million EWOS Feed Production (Tonnes) 1,6 1,4 1,2 1 0,8 0,6 0,4 0,2 8% 7% 6% 5% 4% 3% 2% EPA + DHA as % of oil in the feed 1% 0 0% Figures assume fish oil with 25% EPA+DHA 13
Crisis?...What Crisis? 14
Discards and By-Products? UN s FAO estimated in 2004 that 7.3 million tonnes of fish were dumped globally, equivalent to 8% of the total catch. ICES estimates that 30 to 50% of the total catch of cod in the North Sea went as jettison (2007-2009). In the North Atlantic, ICES assumes that 13% of all catches are discarded, this amounts to 1.3mT. 15
Algae as a source of EPA+DHA? Microalgae are considered a promising future alternative. high productivity and sustainable production possibilities primary producers of EPA and DHA Expected increase in biomass productivity and lipid yield by at least 2-4 fold within the coming 5-8 years. Today, phototrophic production of EPA and DHA is 39 USD/kg EPA+DHA eq Production cost may be reduced to 11.9 USD/kg EPA+DHA eq in the next 5 yrs Comparable cost for EPA+DHA from fishoil is closer to 9 USD/kg EPA+DHA 16
Overview of alternative sources Source: ProAlgae Report, 2013 17
So, there still can be a crisis! Farmed salmon is a much better way to deliver important long chain omega 3 fatty acids to humans, compared to using the same fish oil to produce capsules 18
Operational areas for value creation SECURING ACCESS TO SCARCE RESOURCES IMPROVING QUALITY AND PERFORMANCE OF FISHMEAL AND FISHOIL PRODUCTS NOKm 190-200 COMMERCIAL AND LOGISTICS REFORM 19
Buying marine ingredients is very much about timing Storage capacity constraints Coordinated offerings from suppliers Fishing quota information Industry participation will improve EWOS effectiveness 20
Value creation through commercial and logistics reform Supply chain packaging, transport and intermediate storage - Complicated logistics within Peru and to Europe - All meal is bagged in 50 kg bags - Cracking bags before filling containers to Europe - Intermediate storage and veterinarian control in EU harbors - At least 25-40 USD/tonne in savings Direct sales between supplier and user, avoiding intermediaries margins - Experience show that we can save Brokers margin of 5 USD/tonne - And the services they have provided are already replaced by our development of specialized purchasers and our category team model 21
Operational areas for value creation SECURING ACCESS TO SCARCE RESOURCES IMPROVING QUALITY AND PERFORMANCE OF FISHMEAL AND FISHOIL PRODUCTS NOKm 190-200 COMMERCIAL AND LOGISTICS REFORM 22
Fishmeal quality is increasingly important Fishmeal varies enormously in quality. This chart shows that the growth of salmon fed on best fishmeal is about twice as fast as those fed on the poorest. 23
To control quality you first need to measure it Protein digestibility? Biogenic amines? TVN? phstat? 24
Biological testing: Gold Standard Fish weight gain is measured under standardised conditions so that a large and meaningful data base is compiled Fishmeals categorised into three quality groups Slow and expensive 25
Rapid Analysis: fmtool NMR (Nuclear Magnetic Resonance) NIR (Near Infra Red) 76% of fishmeals assigned to the correct quality group Rapid and low cost 26 26
Upstream integration creates opportunities for EWOS to Develop tailor-made marine ingredient products Quantify missing nutrients Minimise unwanted components Improve raw material consistency 27
A new business model will enable us to implement our competence 1 Recognising the link between fishmeal quality and fish performance 2 Building a database of biological performance 3 4 5 Relating to rapid lab method and developing a purchasing tool Determining what makes high quality fishmeal Changing production methods to leverage value 28
No change = No product development in fishmeal industry! Low Temperature fishmeal introduced in 1980 s. - Nothing new since then. But sales profile has changed enormously since 80 s - Previously most fishmeal was sold for terrestrial animal feed - Now most sold for aqua feed - Terrestrial herbivores vs aquatic carnivores. The industry is ready for well documented new products. - We have reduced marine ingredients by half without any drop in feed performance - The feed industry has driven all of this development 29
Knowledge makes the difference MARKET LEADING PRODUCTS Locally adjusted Meeting specific market needs Based on local market costs SUPERIOR OPERATIONS PROCUREMENT EXCELLENCE Common raw material specifications Specialised skilled category managers Continuous supplier development Delivering the lowest raw material costs in the market OPTIMISED FORMULATIONS Common product specifications & raw material evaluation criteria Recognized tools and criteria for feed formulation Formulator network ensures execution Emphasis on cost and performance COMMON R&D PLATFORM 30
Who benefits? Copeinca EWOS Fish Farmers Differentiates its products Sells at a higher price. First to market with feeds that further reduce marine ingredients Reduce raw material costs ahead of its competitors. Ahead of the game in reduced marine ingredients. Optimise economic productivity per site So, what is it worth? 31
Fishmeal optimised feed can add 10% to growth performance Fish Weight (g) 7000 FEED #1 FEED #2 FEED #3 FEED #4 State of the art +2 % growth +5 % growth +10 % growth 6000 5000 4000 3000 2000 1000 0 11 14 17 20 23 26 29 32 35 38 41 44 47 50 01 04 07 10 13 16 19 22 25 28 31 34 Week Number Typical site with 250,000 smolts Production modelled on 2011 official Norwegian costs Four feed alternatives, priced according to performance potential A salmon price at 35 NOK per kilo 32
Meaning even more value creation in the water Site Contribution (NOKmillion) 14 13 12 11,6 11,8 12,3 13,2 11 10 9 8 7 State of the art +2% growth +5% growth +10% growth FEED ALTERNATIVES 33
Growth Benefit This is a low-risk investment! 12% State of the art +2% growth +5% growth +10% growth 10% 10,00% 8% 6% 5,00% 4% 2% 0,77% 1,14% 1,53% 2,00% 0% Break even growth benefits Expected growth benefits 34
Overall allocation of operational synergies NOKm 190-200 75% IMPROVING QUALITY AND PERFORMANCE OF FISHMEAL AND FISHOIL PRODUCTS SECURING ACCESS TO SCARCE RESOURCES COMMERCIAL AND LOGISTICS REFORM 25% 35
Its about quality, not quantity We have reduced marine ingredient inclusion. To reduce more we want better quality fishmeal. We can now measure quality rapidly and accurately. Next step is to influence quality at source. Best done through vertical integration. That leads to increased shareholder value for all players in the chain. 36
Knowledge makes the difference 37 37
Glossary Acronym IFFO EPA DHA FAO ICES TVN NIR NMR Description International Fishmeal and Fishoil Organisation Eicosapentaenoic acid is an omega-3 fatty acid Docosahexaenoic acid is an omega-3 fatty acid UN Food and Agriculture Organisation International Council for the Exploration of the Sea Total Volatile Nitrogen used as a quality criteria for fishmeal Near-infrared spectroscopy is an optical method for analysing raw materials Nuclear magnetic resonance spectroscopy is used to explore the properties of organic molecules