Megabanks’ $800 Billion Cash Pile Shows Abe Task: Japan Credit

by Shelton on August 22nd, 2014

filed under Business Loans

Prime Minister Shinzo Abe has succeeded in wrestling down the yen and snapping a 15-year deflationary spiral. The challenge of spurring lending by the country’s cash-hoarding megabanks remains.

The nation’s three largest lenders increased their cash and deposits with other financial institutions 5.7 percent in the quarter to June to 82 trillion yen ($800 billion) from the previous three-month period, earnings data show. New loans by Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. fell 329 billion yen to 239.1 trillion yen.

Abe needs to spur lending after the world’s third-largest economy shrank at an annualized 6.8 percent in the second quarter due to an April sales-tax increase aimed at curbing the world’s biggest debt burden. While the banks can no longer park excess cash in sovereign debt amid expectations for higher yields, falling loan rates have narrowed the spread over deposit payments to levels that discourage extending credit, according to Moody’s Investors Service.

“The big three are at a turning point,” said Graeme Knowd, an associate managing director who oversees corporate and financial institutions at Moody’s in Tokyo, in an interview. “They haven’t really taken credit risk for a long time. If Abenomics works, they need to reorient the business model.”

Photographer: Tomohiro Ohsumi/Bloomberg

Biomar sees Chile salmon farmers’ finances improve

by Shelton on August 22nd, 2014

filed under Finances

Fish feed producer Biomar confirmed that Chile remains a key market for it, as several of its customers there begin to look stronger.

“Chile is a very important market, our second-biggest, and biologically it is on a good trend,” Biomar CEO Torben Svejgaard told Undercurrent News.

“Several of our customers there are reporting good quarters financially, and if they have some periods with good prices ahead they will be looking quite stable.”

In the second quarter of 2014, the Americas contributed revenues of DKK 606 million, up from DKK 573m in the same quarter of 2013. In the first half of 2014, the Americas has seen revenues of DKK 1.27 billion, compared to DKK 1.2bn in 2013.

“The financial reports released by Biomars customers were encouraging in the sense that they indicate a general improvement in the companies financial situation,” noted Biomar parent company Schouw in its mid-year report. “No year-on-year growth is expected in the fish feed market in the second half of 2014,” it added of Chile.

Biomar as a whole generated a first half 2014 revenue of DKK 3.4bn. “While virtually unchanged relative to last year, the revenue was based on a significant increase in volumes and correspondingly lower selling prices caused by lower raw materials prices.”

Feed sales volumes were up in the North Sea region due to a much larger overall market, which was very much the result of favorable water temperatures at the beginning of the year, and this more than compensated for the slightly-below-normal market share, the company noted.

Volumes grew substantially in the Americas, due to the combination of a larger overall market and a higher market share. Continental Europe reported lower volumes, mainly due to the financial situation facing Biomars largest customer in Greece and, to a lesser extent, the general credit squeeze in southern Europe.

Gross profit improved in H1 2014, driven by the larger volumes, and Biomar reported ebit of DKK 112m, compared with DKK 63m in H1 2013. Bottom line profit was DKK 78.2m for the first six months of 2014, up from DKK 52.2m.

Norway competition

Svejgaard acknowledged that Norway is very competitive – more so than usual – with Marine Harvest removing some of the available market share by building its own feed production one contributing factor.

“We remain committed to the Norwegian market. Our investment there [to increase production by 30%] speaks louder than much of what I can say,” he said.

“Norway has always been, and will always be, a very competitive market, as all our markets are. But we believe after an unusual period it will eventually return to a normal, tough competitive situation.”

Growth in the Norwegian fish feed market in Q2 2014 was driven by a larger biomass relative to last year. This situation is set to change in the second half of 2014, however, as the overall market is projected to be on a level with 2013, the Schouw report noted.

“In addition, the worlds largest salmon farming company, Marine Harvest, has now started up its own production of fish feed, and as a result the overall accessible market for the three major fish feed producers is expected to contract in the second half of the year.”

“The Norwegian fish feed market remains extremely competitive, but following contract negotiations in the second quarter, Biomar expects to have a normal market share in the upcoming high season.”

Greek troubles and Turkish futures

In Continental Europe, there were no visible signs of progress for the major Greek fish farmers, as their creditors apparently cannot agree on how to tackle the situation, Schouw wrote.

This is also the case for Biomars formerly largest customer in Greece, which for almost a year has been facing actual bankruptcy, managing again and again to postpone the process.

In June Biomar told Undercurrent negotiations with banks about the situation of bass and bream producer Dias, a major client, had yielded little progress so far.

“At Biomar, we believe that Greek aquaculture has a great future. But the new owners, in many cases that banks, need to act faster,” said Biomar’s Europe deputy president Carlos Diaz.

Given the provisions made, and because receivables have been secured by collateral, Biomar expects to avoid an accounting loss for 2014, but the situation has a severe negative impact on sales in Greece.

“Until they resolve their problems with debt and so on, the industry in Greece is not sustainable,” Svejgaard said. “The country is a long-term market for us still, but currently it is in difficulties.”

Of its recently-signed joint venture with Turkish feed producer Sagun, the CEO was more optimistic.

“Greece has declined, and Turkey is now the second-largest fish feed market in Europe. Its a long term plan – we wont really start there until late 2015 – but its very interesting. While Greece is just seabass and bream, Turkey is 50-50 on those, and trout.”