Eco Investor May 2015

Core Securities

Tassal to Expand Into Other Seafoods

Tassal Group's shares fell 42 cents or 12 per cent in the space of seven days, with not much news in between.

A couple of days earlier the company released its sustainability report, which was detailed and positive. But during the fall it put out a statement in response to what it called speculation in the media that a potential acquisition of De Costi Seafoods had been completed. It said the rumour was not correct.

Due diligence on De Costi Seafoods had not been completed but should be soon, and if a deal proceeds, it will be value accretive for shareholders. Tassal also said it will raise its wholesale price for whole salmon on 1 May by $1 per kilogram.

So it is not clear what prompted the fall. But two days later on 23 April, fellow Tasmanian salmon grower Huon Aquaculture lowered its forecast earnings due to falling prices from an increase in imported Norwegian salmon. This saw Huon's share price plunge 22 per cent.

On 28 April Tassal said its originally expected stronger performance than for the first half has been dampened by soft Easter trading and the "continued prevalence" of imported Norwegian products which is affecting pricing.

As part of its growth strategy, Tassal will expand from just salmon to salmon and seafood, said managing director, Mark Ryan. Competition is growing in the salmon market and expanding into other seafoods will provide another income stream; a wider range of sustainable products; and synergies across products, sales and distribution. The Australian seafood market is worth $4.3 billion annually.

Tassal's Sustainability Report gives a positive picture of the company's sustainability progress.

The salmon farmer employs 950 people and operates two hatcheries, six marine farms, three processing facilities, two retail outlets and has 2,000 "retail presence" outlets.

Mr Ryan said the company is committed to transparency and has made a tremendous amount of progress in sustainability over the past four years. "Through all of the sustainability reports that we have produced, including the latest report, we have demonstrated a tangible commitment to opening the doors of our business to external audiences," he said.

"Our partnership with WWF Australia has been pivotal, as has the contribution of researchers, regulators, peak bodies, community members and mentors."

Mr Ryan said 2014 was a solid year of focusing on achieving outcomes to support the company's transformation to a fully sustaining organization. Achievements included progress towards full Australian Stewardship Council (ASC) certification and securing OHSAS 18001 and AS 4801 workplace health and safety certification.

"We have achieved our target of full ASC certification across all marine sites, which was a first for the global salmon farming industry. In addition, we are one of only two aquaculture companies that are certified to the OHSAS 18001 and AS 4801 standards in Australia," he said.

Tassal has developed an adaptive Stakeholder Engagement Program so stakeholders and communities can engage with it about its activities. The 2013-14 Sustainability Report is aligned with the Global Reporting Initiative's (GRI) framework for sustainability reporting and is Tassal's first report to use the GRI's latest G4 reporting guidelines. The report notes that wildlife are the rightful inhabitants of the environments in which Tassal operates, and that Tassal is increasing the percentage of vegetable matter in its fish feed and decreasing the percentage of protein from land animals and fish.

Tassal is reducing the fish component of its feed. The company says the use of fish meal and fish oil from forage fisheries is one of the key sustainability issues in the global salmon farming industry. Tassal has worked with its largest feed supplier to reduce the wild fish component of the feed and increase protein from other sources. Tassal says it is a world leader in the area with one of the lowest Fish Feed Dependency Ratio (FFDR) in the world.

If there is an issue that could impact Tassal, it could be its planned expansion at Macquarie Harbour in western Tasmania, where Head of Sustainability Linda Sams says nature threw Tassal a "curved ball" with several problems that need resolution such as dissolved oxygen in the water.

The 84 page report has some very interesting and unexpected data, such as that Tassal has 8.96 million fish in the water, and it monitors interactions with sharks, whales, seals and birds. Perhaps such detail is another reason Tassal was benchmarked as the world's top salmon farming company in corporate, social and environmental reporting by the independent Seafood service. (ASX: TGR)





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