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Atlantic Sapphire on course for massive Florida salmon harvest in July

JASON HUFFMAN Apr 24, 2020

Never mind the coronavirus.

Norwegian land-based Atlantic salmon farmer Atlantic Sapphire says it remains on track to have its first major harvest in Homestead, Florida, by sometime in the third quarter of 2020 and is still moving ahead with expansion plans in spite of the worldwide pandemic and related drop in salmon prices.

In a recent email exchange with Undercurrent News, spokesperson Lola Navarro provided an update on the company’s efforts, including a few details about its processing facility under construction.

All eyes have been on Atlantic Sapphire since at least 2014 when Undercurrent News first reported then 37-year-old co-founder and CEO Johan Andreassen’s plan to build a recirculating aquaculture system (RAS) on what used to be a giant tomato field about 30 miles from Miami.

The excitement grew in May 2019 — almost a year ago — when Andreassen announced at a meeting in Brussels, Belgium, the company’s intention to expand beyond its first-year goal of 10,000 metric tons of fish to a production rate of 90,000t per year by 2025, delivering what was reported then to be a quarter of all the Atlantic salmon consumed in North America. More recent reports suggest the amount is equivalent to 12.5% of the salmon consumed in the continent.

Andreassen announced the additional goal at the Brussels meeting of harvesting as many 220,000t of Atlantic salmon per year by 2030.

The North American finfish RAS industry is counting on Atlantic Sapphire’s success as the company looks to be its biggest and is already its most attention-getting player, ahead of at least 25 other finfish RAS facilities already harvesting fish or under construction with plans to harvest soon.

But just getting out of the blocks in 2020 should not be considered a given for any new enterprise under the current economic conditions, and Atlantic Sapphire has some challenges.

The spot price for Norwegian farmed salmon on the NASDAQ Salmon Index rebounded somewhat on April 16 after three straight weeks of drops due in large part to the loss of foodservice establishments and was at $4.98 per kilogram. But that’s still 21.21% lower than the $6.04/kg price it was at four weeks earlier.

Also, Atlantic Sapphire has dealt with some self-inflicted wounds, including the demise of 227,000 salmon at its earlier-built facility in Hvide Sanvincdek, Denmark, in early March, a catastrophe blamed on high nitrogen levels. The company has advised that a disaster of such scale couldn’t be repeated in its Homestead facility, where it now maintains about 2.5 million fish, as it maintains six separately contained grow-out systems.

Atlantic Sapphire has made all of the “necessary modifications, both in Denmark and in the US, to make sure that a similar incident is not repeated”, Navarro told Undercurrent.

The combination of the salmon die-off and the collapse of the market blamed on the coronavirus caused Atlantic Sapphire’s stock, publicly traded on the Oslo Stock Exchange’s Merkur Market for small-to-midsized companies, to tumble 49% from a high of NOK 141.50 ($13.32) on Feb. 21 to NOK 72.20 ($6.80) on March 23.

The stock price is not where it was in late February, but it has since bounced back considerably and closed on Tuesday at NOK 103.00 ($9.62).

A ‘superior’ product

Part of the remaining confidence in Atlantic Sapphire is that it remains on course to deliver its annual production of about 10,000 metric tons starting in the third quarter of 2020. Despite the coronavirus, the company does “not expect any delays in production in either location”, Navarro said, referring also to its much older and more established Denmark RAS facility.

The spokesperson declined to answer all of Undercurrent’s many detailed questions, such as the specific month when Atlantic Sapphire would hold its first harvest, how many fish it would initially cull or how it would price its fish. However, in October 2019, the company reported that it had moved its first cohort of salmon — some 500,000 fish — from freshwater smolt tanks to saltwater tanks, putting them on pace to reach the ideal roughly 10-pound weight to be harvested by July at the latest.

One salmon RAS expert interviewed by Undercurrent suggested that Atlantic Sapphire’s first large batch of fish could have its harvest stretched out over an eight- to 12-week period. The key is to have the harvest quickly enough to not overlap with another group of fish reaching their maturity and being ready for harvest.

Navarro’s response: “Once we start harvests in the third quarter of the year, we will continue to have regular harvests and steadily increase harvest volumes until reaching our target rate production volume of 10,000t (head-on, gutted) a year, which we expect to reach quickly.”

Navarro initially declined to answer Undercurrent’s questions about any concerns or expectations the company might have regarding prices. But she confirmed the accuracy of comments made by Jose Prado, Atlantic Sapphire’s chief financial officer and executive vice president, in an article published last month by the Miami Herald.

Prado said Atlantic Sapphire will charge about a 20% premium over other Atlantic salmon as the company believes it is selling a “superior product” that’s “healthier”, “more environmentally correct” and tastes better.

“Atlantic Sapphire is launching its own label to the market, ‘Bluehouse Salmon’, which will highlight the differentiating attributes of our production system, animal welfare conditions, sustainability and the quality of the final product,” Navarro revealed.

The company will maintain full traceability on its products, from egg to finished product, while also maintaining quality assessment and food safety systems, she said.

As reported earlier by Undercurrent, Atlantic Sapphire is building its own 30,000 square foot processing plant on its Homestead property, setting it in a spot adjacent to the grow-out area. It will be equipped with automated machinery from manufacturers in the US, Denmark, Germany and Norway for full filleting, trimming and pin-boning, Navarro said.

About 60 people are to be employed in the processing plant during the first phase.

To keep up with its rapid growth, Atlantic Sapphire has pledged to create as many as 237 total jobs over the next few years with an average wage of $60,000, the Miami Herald reported. As of Dec. 31, the company had 87 employees and, according to the newspaper, it planned to hire another 80 before the end of the year.

Based on listings included on Bamboo HR, Atlantic Sapphire is looking right now to fill at least a dozen positions, including an environmental health and safety specialist. The new jobs that will be created over the next few years include administration, processing, research and development and production, Navarro said.

Atlantic Sapphire’s advantage during the pandemic

Navarro said the processed salmon will be presented in a number of different ways, including as head-on, gutted, and as fillets, with skin on and skin off.

“The majority of the salmon will be fresh, but the plant will have some capacity for frozen volumes and/or value-added production,” she said. “It also has storage capacity for finished product.”

The Homestead-produced salmon will be sold in the US and Canada, both to the current buyers of Atlantic Sapphire’s Denmark-produced salmon and also to some new customers, Navarro said. As Undercurrent earlier reported, the organic food retailer Whole Foods Market is among the big retail chains that currently sell the company’s Danish product.

Also on the positive side, the coronavirus has helped to demonstrate one advantage Atlantic Sapphire will have once it starts producing fish in Homestead. It’ll be able to get to many East Coast US markets by truck rather than having to rely on airplanes.

“Eliminating airfreight from our operations has financial, environmental and logistical advantages as it implies a reduction of costs, transport time and emissions related to transportation,” Navarro said. “The current corona situation highlights one of these advantages, as a long value chain increases the risk of the product not reaching the end-consumer.”

Also, as part of another innovation employed by the company, all packaging material used in the transport of salmon will be fully biodegradable. Boxes will be made of 100% sustainable material.

“This is an important development that is possible thanks to our in-market production of salmon, which allows us to transport salmon via ground freight eliminating the need for airfreight-resistant materials,” Navarro said.

Suppliers and contractors also ‘essential’

Likewise, Atlantic Sapphire doesn’t believe the coronavirus will slow any of its building efforts, and its combined 390,000 square foot, climate-controlled phase one facility should be completely done roughly simultaneous to its first harvest.

The company’s phase two construction is still expected to begin later this year, Navarro told Undercurrent.

“As of now, we are not expecting any delays in construction and we have incorporated measures such as security distancing and mandatory hand disinfection on a regular basis to ensure that we are protecting our people,” she said.

“Onsite workers have all the support and tools necessary and we are paying close attention to continue to take the steps necessary to safeguard the safety of our employees while maintaining operations.”

Navarro noted that businesses deemed essential in the US, including those involved in food production, such as Atlantic Sapphire, have been authorized to continue working and the status also applies to suppliers and contractors.

Following recommendations from health and safety authorities, the Atlantic Sapphire employees who are capable of working in their homes are doing so and the company said it has canceled non-essential onsite meetings and visits, both in Denmark and the US.

“We have incorporated extensive measures and communication to ensure the safety of our employees and communities and have taken all precautionary measures to ensure that all onsite workers, direct and indirect employees, are protected,” the company told Undercurrent. “We will continue to take the steps necessary to safeguard the safety of our employees while maintaining operations during this time.”

Title changes and loans

In unrelated news, Atlantic Sapphire announced in mid-March that it was applying to have its stock listed on the main Oslo Stock Exchange, putting it at odds with a recommendation from the Norwegian Corporate Governance Committee against companies having the same individuals on both their boards of directors and management teams.

In response, Andreassen has resigned his position as managing director, turning that role over to Karl Oystein Oyehaug, who has served the company since 2018 as finance director. Oyehaug will maintain both roles and remain in Miami, the company explains in an earlier press release.

At its board meeting on April 16, the company named Tone Bjornov and Ellen Marie Saetre to its seven-member board of directors, replacing Bjorn-Vegard Lovik, another Atlantic Sapphire co-founder, and Peter Skou.

However, the company said Andreassen will continue as CEO of Atlantic Sapphire, the US subsidiary of the parent company, and added that “the board of directors sees it as crucial for the continued successful development of the company and the execution of the company’s business plan, that [he remain] the chairman of the board.”

Also, Atlantic Sapphire announced on Tuesday that it has fully executed its earlier announced agreement for a $210m senior credit facility with the Norwegian bank DNB intended to allow for further expansion and increased liquidity. As one of the conditions of the credit facility, the company has agreed to issue convertible bonds for an amount of up to $150m.