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Fishmeal storage. (Photo: Copeinca)

Fishing companies’ operating margin falls 15pct in the last decade

  (PERU, 10/9/2018)

The regulatory contributions made by the marine ingredient (fishmeal and fish oil) industry to the State have increased their importance in the cost structure in the period 2008-2017, says a report prepared by Apoyo Consultoría, commissioned by the National Fishery Society (SNP).

This situation has occurred despite the fact that the industry has experienced a significant reduction in its profitability in the last five years, due to the 40 per cent drop in anchovy landings, which is attributed to weather factors and regulatory policy limitations, says the report.

According to the study, there is a clear reduction in the operating margin of fishing companies by 15 percentage points in the 2008-2017 period, in line with the average drop in anchovy resource landings of 6 per cent per year.

"Profitability indicators such as net margin, return on assets (ROA) and return on equity (ROE) have deteriorated significantly. This unfavorable scenario has motivated the increase of leverage on the part of the fishing companies", it notes.

According to the consultant, under a scenario of 4 million tonnes of annual anchovy landings in the period 2019-2022, the return of the Peruvian fishing industry could recover, but it would continue to be lower than that of other extractive industries, such as mining, hydrocarbons and forestry. However, should a scenario of adverse regulation and economic stress arise, the return could be significantly reduced.

"Although a recovery in the sector is expected for 2018, it is expected that it will not be enough for shareholders to obtain returns for their investment that will help them cover the bad years," the report states.

According to Apoyo Consultoría, while in 2016 national fishing companies paid USD 16.7 per metric ton (MT) of anchovy, in Chile the payment was USD 13.8 per MT. This difference would explain why the Peruvian industry assumes a greater burden for fisheries inspection and social contributions.

In this context, SNP president Elena Conterno informed that the sector has formally proposed the creation of a table of competitiveness of the marine ingredients industry. This request is due to the decrease in catches, the deterioration of profitability indicators and the increase in leverage, which implies the loss of value of the shares of the fishing companies that are listed on the stock market and also of those that are not listed.

"There is a myth that this is a buoyant industry but reality shows us the opposite. What we have is an industry with high fixed costs, high volatility, little growth potential, strong competition from substitutes, and that it is not giving return to its investors," explained Conterno.

In this regard, she recalled the report prepared by EY on tax burdens and some legal obligations of the fishing sector, which reveals that in a scenario of 4 million MT of annual catch of anchovy, companies pay 50.4 per cent of their utility operational, much more than other extractive industries.

"Another aspect to assess is the current uncertainty facing the fishing sector in general in the face of climate change and a possible arrival of the El Niño phenomenon on our coastline," SNP president said.

Finally, she added that a measure that could help improve the competitiveness of the marine ingredients industry is to return to a fisheries management system in the southern zone that allows the exploitation of the resource without jeopardizing its sustainability, but generating a positive economic impact, both for companies as for workers and citizens.


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Address: Av. República de Panamá 3591 Piso 9 San Isidro
City: Lima
State/ZIP: (27)
Country: Peru
Phone: +51 1 422 8844
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E-Mail: [email protected]
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