Eco Investor March 2017

Core Securities

New Farming Methods for Tassal

Tassal said it would implement innovative fish farming techniques at Okehampton Bay in Tasmania now that the Marine Farming Planning Review Panel has assessed that the company's lease at the Bay is suitable for salmon farming.

Managing director and chief executive Mark Ryan said Tassal has implemented an innovative approach to farming salmon, mussels and seaweed alongside each other under the company's co-culture model to bring extra value to the marine site and offset environmental inputs. Tassal will also trial sea urchin ranching to further benefit the environment while dealing with a local pest.

If all goes well, Tassal aims to have Atlantic salmon in the water by spring 2018.

Mr Ryan said the company will comply with all conditions in the independent panel's report about the development of its planned fish farm at Okehampton Bay. The plan has been controversial and the ABC's 7.30 report said the expert review attracted 6,000 submissions, with the overwhelming majority against the plan.

Mr Ryan said Tassal understands and appreciates the importance of the amenity, recreational and social value of the area, and will continue dialogue with stakeholders. The legislative framework and processes for regulating marine farming in Tasmania provide certainty for industry, input from community and stakeholder groups, and the environmental protection required to maintain the state's marine ecosystems.

Okehampton Bay is an expansion location for Tassal following issues at Macquarie Harbour, where Tasmania's salmon industry has run into expansion problems. Macquarie Harbour has proven very problematic with serious environmental concerns that have led to a reduction in stocking levels. Last month Tassal said it would fully destock its most problematic site and get it back into compliance. It said it has engaged the independent scientific community to better understand how to farm Macquarie Harbour, and may halve its annual smolt input to one million to ensure sustainability.

Also last month, Huon Aquaculture launched legal action in the Federal Court and the Supreme Court of Tasmania seeking stronger regulation of marine farming of Macquarie Harbour to ensure it is sustainable. Among other things, it wants the biomass limit and allocations declared invalid.

However, Tassal has decided to oppose Huon Aquaculture's proceedings against the industry's regulators. Tassal said it supports the decision of the industry regulators about Macquarie Harbour and also wants to protect its interests as an operator there. Watch the space.

Another change in Tassal's farming method is to leave its fish longer in the water so they are bigger when harvested.

This led to 3 per cent lower revenue for the December half. 11,761 hog (head on gutted) tonnes were sold compared 13,508 hog tonnes in the December 2016 half. Total biomass at 31 December was 24,573 tonnes compared to 15,164 tonnes at 30 June 2016 and 19,596 tonnes at 31 December 2015.

The change is expected to underpin strong growth in 2017-18, as well as generate increased revenue and earnings over the rest of 2016-17.

Despite the fall in revenue, the half year profit was up 10 per cent due, said Tassal, to enhanced margins from a more favourable sales mix - more wholesale less retail - and optimizing salmon pricing in the domestic and export markets. There was also $20 million less spent on raw materials and consumables.

Investors wanting to keep an eye on international salmon prices can do so with the NASDAQ Salmon Index (NQSALMON), which tracks the weighted average weekly reported sales prices and volumes of head on gutted Atlantic Superior Salmon reported by Norwegian salmon exporters and producers. The exporters represent the total exports from Norway. (ASX: TGR)

Tassalís recent profit and dividend history.

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