The past year has been one of the most-eventful 12-month periods in the history of the Norwegian salmon-farming industry. Record prices off the back of unwaivering demand growth have resulted in all-time-highs in reported earnings, leading Norway to post record-breaking export revenues. But one shadow has loomed large since September 2022 – the Norwegian government’s plan to introduce a new tax to salmon farms in 2023.
More clarity is expected from the government in the coming weeks, but its initial proposal of a 40 percent resource tax requirement for all salmon and trout farms harvesting 5,000 metric tons (MT) or more per year was delivered six months ago with the explanation that a portion of the revenue generated by the larger salmon producers would go to improved social infrastructure, particularly for the coastal communities that accommodate salmon aquaculture. The proposal was received with a firestorm of criticism, with the industry complaining it comes on top of a 22 percent corporation tax.
There has been considerable unrest in the months that have followed, with many leading players warning long-term industry growth has been jeopardized. Share prices of the leading Norwegian salmon-farming firms have tumbled, with Pareto Securities Equity Research Analyst Sander Lie telling attendees at the 2023 North Atlantic Seafood Forum that NOK 50 billion (USD 4.6 billion, EUR 4.4 billion) disappeared off their collective value immediately following the government’s announcement.
Since then, the overall seafood index has underperformed and is presently down 6 percent compared to where it was before the tax plan was delivered, Lie said. Nevertheless, this has caused some volatility in the market, he said.
“[There has been a] massive revaluation within the space,” Lie said, with shares are still trading far below their historical valuations despite a recent upswing.
“The resource tax proposal basically shaved 20 to 30 percent off of our earnings estimates for the next three years for all the salmon farmers. On top of that, we’ve also seen a massive change in the investments in the industry," Lie said. "All investments in smolt facilities, harvesting facilities, and also processing facilities have now been put on hold. We’ve seen investments of close to NOK 40 billion [USD 3.7 billion, EUR 3.5 billion] [frozen]."
As it would apply to farmers of over 5,000 MT, the tax proposal also affected last year’s new-license auction, with prices paid for new capacity far below the market’s expectations. Lie estimated this decreased price shortfall to be around NOK 5 billion (USD 464 million, EUR 437.4 million).
None of the large Norwegian players participated in the auction, with only smaller companies having the incentive to bid for new capacity, Lie said.
“There are massive consequences for reinvestments and development of the industry as a whole if the current resource tax proposal goes through,” he said. “We’re likely to get some more color on that this month, but this is what’s holding down the shares right now and what’s affecting the market because the underlying [industry] looks rock-solid in the medium- and longer-term.”
Despite the looming tax proposal, Pareto remains confident in the health and resilience of Norway’s salmon industry, Lie said.
However, Mowi CEO Ivan Vindheim said the proposal to triple the tax level for Norwegian salmon farming to 62 percent, or up to 80 percent when factoring in the country’s wealth tax, is “unsustainable.”
Such a tax burden would place “major limitations” on the industry’s future growth and development if it’s put into action, Vindheim told NASF.
“There’s no such thing as a free lunch,” he said, warning of a deterioration of the industry’s investment capacity, and “consequently, lead to the demise of Norway’s salmon-farming economy – our Silicon Valley. Not today, not tomorrow, not next week, but over time.”
Mowi, the world’s largest salmon-farming company, expects to produce around 484,000 MT of salmon in 2023 across seven countries, and Vindheim said the industry’s development would “continue unabated, at full force in other countries” and that the “technological shift would be accelerated at the expense of Norway – on our watch.”
The situation is too critical to be left to “passing-by” politicians who “do not understand the consequences of their actions, Vindheim aid.” He urged industry to “keep on fighting.”
Adding further weight to these calls, SalMar CEO Frode Arntsen said the tax poses to jobs related to the business of salmon farming, particularly in the processing sector.
SalMar, the world’s second-largest salmon farmer, is estimating a 2023 harvest of 277,000 MT, has had to lay off hundreds of its processing staff and reduce the hours of many others as a direct result of the tax proposal, Arntsen confirmed.
“This is something else the politicians and the government need to think about before they come with such a proposal. It has been very damaging for SalMar,” he said.
In regard to overall salmon production, Pareto anticipates ...
Photo courtesy of SalMar
