Salmones Camanchaca
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SALMONES CAMANCHACA ANNUAL REPORT 2018 01 INDEX CHAPTER A Word From ANNUAL REPORT 2018 04 Our Chairman SALMONES CAMANCHACA 02 CHAPTER Board of 06 Directors’ Report 03 CHAPTER Financial 26 Evolution 28 Summary of Financial Position 29 Consolidated Financial Statements 30 Consolidated Statement of Financial Position 31 Statement of cash flow 32 Summarized individual and consolidated financial statements 04 CHAPTER 34 The Company 36 Identification 38 Our history 40 2018 Highlights 42 Articles of incorporation 44 Company’s structure 46 Control 48 Ownership structure 49 Agreements and contracts with subsi- diaries or associates 50 Subsidiaries 52 Associates 55 Board members and executives with positions at subsidiaries or associates 2 05 09 CHAPTER CHAPTER Directors and Share Transactions and 56 Key Executives Synthesis of Material Facts 102 58 Board of directors Reported to the CMF 60 Key executives 62 Professionals, technicians and laborers 104 Transaction of executives and controllers 66 Compensation of the Board of Directors 104 Share transactions in Chile 67 Compensation of executives 105 Share price development 106 Synthesis of material facts reported to the CMF 06 10 CHAPTER CHAPTER Salmones Camanchaca's Financial Statements, 68 Business and Industry Earnings Report and 70 Our operations Summarized Individual 78 Marketing network Subsidiaries Financial 110 Statements 07 11 CHAPTER CHAPTER 80 Sustainability Responsibility 82 Friendly Camanchaca Program 212 Statement 90 Efficient Camanchaca 08 CHAPTER Main Risk Factors and Investment, Financing 94 and Dividend Policies 96 Main Risks and Uncertainties 100 Investment, Financing and Dividend Policies 3 SALMONES CAMANCHACA CHAPTER 01 A WORD FROM OUR CHAIRMAN Dear Shareholders, I am pleased to present Salmones Ca- manchaca's annual report for 2018. The year was marked by several very impor- tant accomplishments for our Company, beginning with our initial public offering on the Santiago Stock Exchange and si- multaneous placement of share certifica- tes on the Oslo Stock Exchange. We also celebrated numerous operational and commercial achievements throughout the year, thus making 2018 a record year for our Company. All of this was possible thanks to the dedication and hard work of our employees and executives. Our decision to list the Company on the Santiago and Oslo exchanges positioned Salmones Camanchaca as a model in the Chilean market as the first and only Chi- lean and Latin American company traded on the world’s most important seafood market. Salmones Camanchaca raised approximately US$50 million through the placement, which has been used to finance the investment plan presented to investors in the pre-IPO roadshows. In 2018 we reached our production and cost targets with great accuracy, reporting sales of US$ 332 million and EBITDA of US$ 83 million, up 59% from the prior year. These favorable results were achieved through strict expense 4 ANNUAL REPORT 2018 control, enabling the Company to produ- I believe that the capital markets have helped reduce our working days lost ce at very competitive costs in relation recognized these achievements and our rate by 42%. to its peers in not only Chile but also success in meeting expectations gene- Norway, considered global leaders in the rated during the IPO and have placed Projections for 2019 call for 55 thousand production of Atlantic salmon. their trust in our Company and manage- tons of Atlantic salmon to be harvested, ment, as evidenced by the stock's market reflecting growth of just over 10% with These results can also be explained return during the year of almost 100% and respect to the prior year. The Company by timely changes in Chilean regula- the fact that seven investment banks is also resuming production of Coho tions that have created incentives for in Europe currently track the Company salmon—a species widely farmed in the preserving sanitary conditions, thereby through periodic reports. Chilean salmon industry—expecting to substantially improving biological results harvest 4 thousand tons this year. With for both our Company and the industry. The sustainability of our business is a this new business line, it hopes to di- These improvements are reflected in the critical element of our long-term deve- versify production and market risks and Company’s annual mortality indicator lopment and success. In environmental take better advantage of its available of 8.4% and its feed conversion ratio of matters, for the first time ever, Salmo- facilities and concessions. 1.17, measured as kilos of feed per kilo of nes Camanchaca certified almost one biomass produced. third of its harvests in 2018 under the Salmones Camanchaca will continue to demanding international standards of work on multiple fronts, in keeping with In addition, growth in smolt stocking the Aquaculture Stewardship Council our principles and values, to improve and has been discouraged through densi- (ASC). This certification confirms that add value to not only our shareholders ty regulations that force companies to the Company's processes are executed but also our employees and the com- stock at lower densities when intended under the strictest global sustainability munities impacted by our production growth exceeds 3%, thus making it less models for aquaculture. Similarly, we activities. economically attractive. became the first salmon company to register with the Huella Chile Program Lastly, Salmones Camanchaca expe- The aforementioned investments led to from the Ministry of the Environment. rienced changes in management du- a reduction of 13% in processing costs This program is designed to encourage ring 2018, activating succession plans during 2018, which were strongly im- public and private-sector companies to replace the CEO in May. Since then, pacted by our larger scale of operation to quantify, report and manage their the Company has been led by Manuel for Atlantic salmon with 48.5 thousand greenhouse gas (GHG) emissions. Arriagada, a professional with broad ex- tons harvested in 2018. perience and an extensive track record Regarding community engagement, in the industry. With Atlantic salmon harvests up by our corporate social responsibility pro- more than 41% and farm and proces- gram, “Camanchaca Amiga”, continued We invite our employees to remain com- sing costs below US$4.2 per kilo of WFE to strengthen ties with communities mitted to our development and growth, salmon, the Company closed 2018 with near our production facilities. In 2018, and our shareholders to continue to record EBITDA and net profit. These we carried out 217 activities in three place their trust in the Company's ability achievements occurred in a stable sani- key action areas—community outreach, to properly manage its capacities, talents tary context thanks to favorable environ- caring for the environment and healthy and assets, framed by the values of res- mental conditions at our sites and farm living—which had a favorable, direct im- pect for people and the environment. conditions returning to normal after the pact on more than 15 thousand people in harmful algae bloom that affected the the Biobío, Los Lagos and Aysén regions. Sincerely, industry in 2016. Some initiatives worth highlighting in- clude coastal cleanup days, recycling As a result of funds raised from the ca- programs, training courses, culinary pital increase and proper planning in heritage fairs, support for schools and prior years, the Company completed sporting events. The Company is ex- reconstruction of the Petrohué hatchery tremely pleased to see how all these in 2018, after facilities were seriously initiatives have strengthened relations damaged by the eruption of the Calbu- with surrounding communities since the co volcano in 2015. With these facilities program was launched in 2013. now operational, the Company's smolt production capacity will enable it to In terms of our employees, the Company deploy its production plan to harvest 60 is always concerned about reducing thousand tons (WFE) of Atlantic salmon days lost for injuries and professional Jorge Fernández García in 2022 using sites and concessions illnesses, which reached 399 days in CHAIRMAN, SALMONES currently in operation. 2018 compared to 654 days in 2017. This CAMANCHACA 5 SALMONES CAMANCHACA CHAPTER 02 BOARD OF DIRECTORS’ REPORT SALMONES CAMANCHACA ANNUAL REPORT 2018 6 SALMONES CAMANCHACA FINANCIAL RESULTS Salmones Camanchaca S.A. is a vertically 1. THE PRICE OF ATLANTIC SALMON, integrated salmon producer engaged which is very sensitive to Norwegian in egg and breeder production, recir- and Chilean supply conditions, and culating hatcheries for Atlantic salmon the exchange rates of its main trading and pass-through hatcheries for other partners; species, estuary and sea grow-out sites, primary and secondary processing, mar- 2. SANITARY CONDITIONS FOR ATLAN- keting and sale of Atlantic salmon. The TIC SALMON, which affect conversion Company farms trout at estuary grow-out factors, the use of pharmaceutical sites through a joint venture (1/3 share of and mechanical means to improve results) in effect for four more years with fish welfare and the final biomass an estimated average annual harvest of across which costs are allocated. 12,000 tons WFE. For its main business (Atlantic salmon), the Company has an 3. THE COST OF FEED, which represents annual estimated harvest of 55,000 tons approximately half of the live fish unit WFE for 2019-2021, in addition to an esti- cost at harvest. mated 4,000 tons WFE of Pacific salmon beginning in