Gill disease to cost salmon farmers £30m

Deputy Business Editor, Sunday Herald

Saturday 19 January 2013

GRIEG Seafood, one of Scotland's big five salmon farmers, has lost one-third of its latest harvest to amoebic gill disease (AGD), the ailment that is set to cost the industry more than £30 million in lost revenue.

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Steven vass

Grieg owns 31 farms on the Shetland Islands and employs 180 local people.

It confirmed in its latest trading update that 2400 tonnes of salmon with a market value of some £8m died between October and December of last year.

Like many farmed salmon in Scotland, the fish had been infected by AGD, a disease that is not normally seen in this country but has thrived in unusually high seawater temperatures in the past few months. Grieg's farms were then also attacked by sea lice, and fish already weakened by the AGD then died from the lice treatment. Oslo-listed Grieg has taken a NK45m (£5m) writedown over the lost tonnage, pushed up to NK88m (£10m) due to problems with a different disease at its Canadian farms. It has become the latest victim in an AGD outbreak across Scottish salmon farms, described by one analyst as very serious. It is expected to cut 2013 tonnages by at least 7500 tonnes or 5%, which, added to Grieg's losses, will represent a revenue loss of about £32.5m at a per-kilo price of £3.25 (as quoted by Index Mundi). In reality, however, the situation could be worse after the other major farmers update the markets in the coming weeks. The Scottish Salmon Company (SSC) and Marine Harvest (MH) have both confirmed that they lost fish in 2012 due to AGD, and harvested fish earlier than planned while they were still healthy. This would affect its 2013 tonnages. The cost of treating the AGD with fresh water or hydrogen peroxide needs to be added on as well. Kolbjorn Giskeodegard, an analyst at Nordea Research said: "Clearly it's very serious and it's affecting the industry more strongly than I had estimated beforehand. "Harvesting fish early obviously has a very serious effect on cash flow and earnings. If you are harvesting the fish at 2.5 kilos instead of five kilos, the cost will be higher and the price lower. "No-one is to blame for this problem. We will have to wait until the Q4 results to be able to more accurately estimate this issue."Henning Lund, an analyst at Pareto Securities, who is forecasting a 5% hit to 2013 tonnages in Scotland, said: "The volume impact might be bigger, but it remains to see if this will be a significant problem next summer. Also we believe the farming industry is more prepared and has learned to deal better with this." AGD was first reported in Scottish waters by the SSC at Lamlash on the island of Arran in October 2011, where it had killed 279,000 salmon. Since then, a freedom of information request by anti-salmon-farm campaigners found that 29 farms reported infections between July and October of last year alone, as the disease spread north to the Western Isles, the Orkneys and now the Shetlands. AGD attacks the fishes' gills, producing mucus which, if left untreated, can cause suffocation. Grieg Seafood did not return calls in time for publication.Meanwhile, Marine Harvest, the world's largest salmon farmer, last week reported an 85% drop in fourth-quarter core earnings due to the weak price of salmon. Earnings before interest and tax came in at £6.6m, well below the analysts' consensus £18m.

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Gill disease to cost salmon farmers £30m

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