Q&A: Matthew Hill


Steven Hedlund

Published on
April 13, 2009

The seafood trade was rocked by the global financial crisis, particularly by the crash of Iceland's banking system. The situation has improved since last fall, but it's going to take a while for the seafood industry, and consumers, to rebound from the recession, according to Matthew Hill, director of KeyBanc Capital Markets in Seattle, who works with several large Seattle-based seafood suppliers.
Hedlund: Last fall, bank failures - particularly the crash of Iceland's banks - squeezed seafood suppliers' credit lines. Is it any better now than it was then?
Hill: It has improved slightly since last September and October. Lehman Brothers' collapse was dramatic for the entire world, but it certainly impacted the seafood industry as Icelandic banks - Glitnir, Landsbanki, Kaupthing - went into receivership. Iceland as a country no longer had access to liquidity because Lehman provided so much of that. So that really dried up credit sources for western Europe.
Have the bank failures hit any one seafood species particularly hard?
Cod's been hit probably harder than any other product. Pacific cod prices were at an all-time high in 2008. And then they collapsed by almost 50 percent, and they haven't recovered. They haven't dropped any further, but the haven't increased yet. It's due to the financing situation in Europe. It's improving, but it's not improving dramatically. [European seafood companies'] ability to buy new product is limited. Companies are reluctant to build up new inventories. They're working through their existing inventories. But buyers are reluctant to buy in large quantities right now. They want make sure the market continues to improve before they lock in at a price that may continue to drop.
Has the recession changed consumers' food-purchasing habits?
[Seafood] buyers are feeling more optimistic. But consumers are still looking for lower-priced alternatives. [Demand for] higher-end seafood items like king crab is down, as is higher-end salmon. Consumers are trading down to lower-priced items, looking for value.
Will prices of higher-end Pacific salmon products be as high as they were last summer?
[Ex-vessel prices of] troll-caught silver salmon last year were USD 3.75 to 3.90 (EUR 2.83 to 2.94); this year they're in the USD 2.75 to 3.15 (EUR 2.07 to 2.38) range. For sockeye salmon, it's similar pricing - USD 3.50 to 3.75 (EUR 2.64 to 2.83) last year, and now it's in the 2.75 to 2.90 (EUR 2.07 to 2.19) range. Demand [for troll-caught salmon] has always been high in Europe and Japan. Japan has benefited from the strong yen, until just recently. So the Japanese, who typically are willing to pay for their seafood, just in the last three months have seen a pretty significant decline in the value of their currency, and that's going to hurt them. The euro, however, is holding its own.
Will there be any activity on the merger-and-acquisition front this year?
There will be very little activity. The activity you will see is stronger companies picking up distressed properties. A great example is Trident [purchasing] Wrangell Seafoods out of bankruptcy. Private equity firms that entered the [seafood industry] in recent years are going to back off because they can't get the financing to leverage an acquisition and get the returns that they're used to seeing.
When do you see the North American seafood industry rebounding from the recession?
If [a company's sales] were down in 2008 over 2007, it was because of the last three months of the year. As far as 2009 goes, it's 50-50 - half of the companies are saying their sales are going to be down or flat, and the other half are saying their sales are going to be up because they're taking market share from weaker companies and growing their businesses. The companies with the biggest Rolodexes right now are continuing to take on additional accounts. But I don't see the seafood industry recovering anytime sooner than the global economy.

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