Surge in capital expenditures

The Norwegian salmon farming industry increased their capital expenditures in 2019. “Larger smolt”-strategies and sea lice challenges could explain why.

Capital expenditures (CapEx) among the 40 large  salmon producers in Norway, those with 6 or more licences each,  surged by 56% last year, and CapEx per kg harvest volume (head on gutted) increased from NOK 5,1 in 2018 to NOK 7,4 in 2019. According to our latest analysis of the Norwegian salmon farming industry, several factors contribute to this increase.

Investments related to mitigation of sea lice. Over the past three years we have observed an increase in the use of mechanical delousing which is gradually replacing the medicinal methods. Over the last years the sea lice situation has hampered biological growth and led to early forced harvest. As sea lice continue to be problematic, investments in methods to remove sea lice, and their effect on fish welfare and farmer profit is a necessity.

Investment in smolt production facilities to enable the production of larger and higher quality smolt was a priority in 2019. In light of sea lice challenges, there has been increased focus on producing larger smolt over the past years to reduce the time fish spend in sea. This strategy is adopted by the majority of Norwegian salmon farmers, which has led to large investments in new – and larger – smolt facilities.

Higher profitability.  From 2016 onwards, profitability in the Norwegian salmon farming industry has been satisfying (until the COVID-19 pandemic), giving more financial flexibility to undertake large investments. With the pandemic putting pressure on salmon prices, this factor is currently not a big driver for increased investments. On the contrary, the companies have been more cautious due to the unsecure status. However, with positive vaccine news emerging lately, there are signs of a better outlook for the salmon farming industry.

At the end of 2019, the predicted trend for 2020 was that CapEx would continue to increase and that all the mentioned factors would continue to play an important role. However, as COVID-19 has impacted the markets, it will be interesting to see the effect on this years’ CapEx.

Want to know more about the Norwegian salmon farming industry?
Check out our newly released report Salmon Farming Industry in Norway.