Ladies and gentlemen, both here in the audience and watching through the webcast, welcome to the third Capital Markets Day of Marine Harvest. I hope you all enjoyed yesterday, both the visit to the feed factory and to Persfløya Sea Farm, and also the dinner with fantastic salmon. Today, we're going to have some presentations, but first, some safety announcements. You will find the exits here on the side and the back. If there is an alarm, please walk calmly through the doors and then we meet up at the parking lot in front of here. There's been no exercises planned, so if there is an alarm, we walk out. In case any of you need the Wi-Fi, the Wi-Fi here is called Publitum and the password is Surfe, S-U-R-F-E. Now onwards with the presentation. The first one out is our CEO, Alf-Helge Aarskog.
Alf-Helge Aarskog has been the CEO of Marine Harvest since 2010. He holds a degree in fish nutrition from Norwegian University of Life Sciences. If any one of you should be interested to know which species Alf-Helge has worked with previously and where in the world, you would be in for a very long answer, I will give you the short version. Our CEO has been working with nine different species around the world and been working in a lot of different locations spanning from Alaska to Hawaii and even in Bergen. Alf-Helge, the floor is yours.
Thank you, Kristine, and welcome. I would like to start with a little bit of history. If we go back 200,000 years, that's as far back as we can trace mankind or our species, Homo sapiens. What's interesting is the development of this species. It took us 199,800 years to become 1 billion people on this planet. It took us another 112 years to become 2 billion people on this planet. When I was born around 1967, we were 3.5 billion people, and today we are 7.3 billion people on this planet. A tremendous explosion of number of people in a very short period of time. You can ask yourself the question, why did this happen? The answer is pretty simple. It's really two things. Better agricultural practices and better medicine. Those are the two most or the two common factors that actually drive that development.
That has an implication even for us. Going forward, well, the estimates are that within the next 34 years, we'll be 2 billion more people on the planet, so exceeding 9 billion in total, that will require enormous amount of food. If you think about it, according to FAO, the food supply need to double in the next 34 years. One reason is that there will become obviously more people, it's also more people moving into the middle class throughout the planet, again, it's an opportunity. In terms of the aquatic world, well, FAO again tells us that we need to produce 47.5 million tons more of aquaculture protein. That's both a tremendous task and a tremendous responsibility, especially when you know that 90% of today's fisheries throughout the world is either fully exploited or is fished or overfished, to be honest.
There's not much room to gain there. We take a look at this, it is a fact that in 1988, not that long ago, I had fed a lot of salmon in 1988. We had 17 kilo of wild fish per capita. In 2013, that had dropped to 13. Opposite direction, the aquaculture side had gone from 2 kilo per capita in '88- 10 kilo per capita in 2013. At least we're moving in the right direction. In addition to that, 70% of this planet is ocean. Only 2% of the calories we take out as food comes from the ocean. Tremendous opportunity in that regard. Fish farming has often been said that we use a lot of fish to produce salmon.
The fact is, in Marine Harvest in 2015, we still needed 0.74 kilo of fish to produce 1 kilo of salmon, but this is moving in the right direction. We are a net producer of fish today. It's going to continue that direction going forward. In terms of feed conversion ratio, well, compare salmon to the other species, and you'll see it's far more efficient. With the planet using already approximately 2.5 times the resources we have, well, we need to be efficient also in food production. If you think about climate gases and the emission of climate gases, well, the fact is that 14% of the climate gases comes from transportation. 15% of the climate gases come from agriculture or land-based protein production. If you can reduce that by changing the way you eat, well, it's a good thing for the planet.
In terms of another story, which is one of my problems and many's problem, it's a paradox. At the same time, more than 1 billion is obese to the point where it actually is causing health problems and causing a lot of cost throughout the world. The recommendation from the U.S. guidelines and U.S. dietary guidelines from 2015 to 2020 is that we should eat salmon or fish at least twice a week. If that was the case, well, we had achieved our vision. The vision in Marine Harvest is leading the blue revolution. That is about changing the way people think when they choose what to eat. It's also about be leading in the areas where we operate. Our value chain is three divisions. One is the feed division.
We want to be leading in the feed production because it's a central part of our operation. We want to be leading in the farming operations, and we want to be leading in making new products of our main product. Short about Marine Harvest. We are one of the leading seafood companies in the world. There are three above us. They are all Asian. It's Nissui, Thai Union, and Maruha Nichiro as well in turnover. At least we're moving in the right direction. Today, we're producing 5.9 million meals of salmon every single day, sell it to more than 80 different countries. We have chosen a fully integrated value chain, headquartered in Bergen and are listed both in Oslo and on the New York Stock Exchange. If you could look at this operation, well, at the end of 2015, we were 12,454 people working together in 24 different countries.
Farming, as many of you know, is diverse. We are in Chile, we are in Canada, we are in Scotland, Faroe Islands, Ireland, and Norway, and we think risk management in regards to farming. In terms of our sales and value-added operations, we have processing factories throughout Asia, in Europe, and also in the U.S. Right as we speak, we are building our third plant in the U.S. in Dallas. In terms of the value chain, well, we've chosen a fully integrated value chain and there's a reason for that. The reason is that we control the most important input factor from a cost perspective through feed, but also we control the input factor in terms of the product that turns out on your plate through feed.
On the farming side, we are leading and the biggest in the world. The same is the case in terms of secondary processing. You saw some of our products outside here. Our main focus going forward, well, I think in the long term, is if this is going to grow and if we're going to achieve our vision, well, it's going to be through developing new products. It's going to be to have a more consumer-friendly products. We have a lot of focus on that, improving biology. I think you saw out on the site yesterday how important that is. Both through R&D and through best practice, we have approximately close to 200, 250 sites operating throughout the world in fish farming. There's a lot of competence out there.
We can improve, and we know because there's variation in the results and that we still have a long way to go. Focus on cost. The cost has escalated, as you know, in this industry over the last few years. There's a reason for that. Obviously sea lice is one of the main factors, but it's also feed cost and feed cost especially in Norway because of exchange rate on the dollar. Anyway, we have done some major steps. We've taken control of our own feed, and we will expand that. You will hear more about that later. We have today taken control over fish logistics. It's an operation where margins have been tremendously high over the last period of time. We want to improve that, and you will hear more about that later.
We are working on central buying of major items into our operation, and we will continuously focusing on make sure that we have the lowest cost. That will always be a main focus for Marine Harvest. Our guiding principles. Well, we report in terms of products, planet, people, and profit. Interchangeable list and dependent upon each other. If we fail on the product side, well, the company fail. If we fail on the sustainability side, the company fail. If you do not have good people in Marine Harvest, well, the company fail. If you don't make money, the company fail. These are equally important. Let's start with product first. Key drivers in our operation, we need to develop products that taste good, that are convenient, and that are healthy. That's attributes with salmon that is key important.
If you look at taste, and we know that in the U.S., 78% of the population in the U.S. like the taste of salmon. Still, the consumption in the U.S. is tiny. It's not about the taste. It's more about developing the convenience, making sure that the consumer know how to cook and prepare the product, and spread the news about the health effect of the product. Again, we have a long way to go in this regard, but our products are tasty. We have the best raw material there is to start developing new products. A fantastic opportunity. Salmon is versatile to the point where it's almost your own imagination that tells you how to deal with it in the kitchen.
If somebody told me in 1985 when I started to grow salmon, that I should eat salmon raw, I would have looked at them and said, "You're crazy." Today, that's maybe one of the most common ways to eat salmon. The world is changing, and I think the focus from young people will be more and more going towards the healthy solution for the future. It has to be tasty as well. Convenience. Well, 1991, that was the year we started to gut salmon in Norway. Before that, we send all the guts to Europe, meaning everything inside the salmon. It has developed since then. I think the products you see out there today, just a few examples of Marine Harvest, probably more than 5,000 different products. Anyway, this will continue.
It is important that we take the customer and the consumer into account when we develop these products. The potential, again, is tremendous. In terms of health, well, this is medicine on a dinner plate. It's good for you all the way through. It's good proteins, it's high in omega-3 fatty acids, it's rich in vitamin D and vitamin B12, has a lot of good minerals. A great product throughout. In terms of equal importance, if we do not have good people in Marine Harvest, again, it fails. Our values as the foundation of Marine Harvest, well, it's change. Everybody in Marine Harvest needs to think about change, how to do things better. Second one, share. To make sure that you share what you know with your colleague throughout the operation. If you want to improve this company, well, we have to share our knowledge. It's trust.
We are listed, you know many of you are investors. If you cannot trust us, you will not invest in us. The same goes for the company internally. We need to trust each other throughout the company. It's also about passion. It's about passion for the company, it's about passion for the product, it's about passion for what we do. I know, I think you saw it yesterday out with the guys out on the farm or in the feed factory. These guys, they have passion for what they do. It's extremely important if you want to get something done. If you want to reach your visions, this is key. Planet.
If you cannot do this in a sustainable way, if you cannot continue to grow this operation better tomorrow and not compromise the future of the industry or the surroundings, well, we don't have a place in the future. The way we do fish farming today is sustainable. The way we produce protein is probably the most sustainable protein production there is in the big picture. You need to take everything into account. If you think about what I said in previous about climate changes, well, this is probably the most sustainable food production there is. That is a fact. At the end here, profit. Well, our being hinge on ability to provide good profits both to shareholders, but all stakeholders throughout the operation. If you cannot make money, well, this fails, and that's just how it is, and I guess for most companies.
The development in Marine Harvest, in 2011, our turnover was at EUR 2 billion. We've grown to EUR 3.1 billion in 2015. At least we are on the right path. In terms of earnings, operational EBIT was EUR 348 million in 2011, it dropped 2012. There was a supply increase in the global marketplace of 22% in 2012. Prices came down, profit dropped. 2013, a good year, 2014 a good year, 2015 a good year almost throughout the business, but we lost almost EUR 100 million only in Chile. Anyway, total growth rate in this part, 13.5% annual from 2011 to 2014. I think fairly good performance. In terms of another important key factor in regards to profitability, it's return on the capital employed, return on our investments.
How good is this operation in terms of that? Well, our target is 12% over a cycle. We did, as you can see, 16.7%, dropped down in 2012, and then back up again 2015, also impacted by Chile, obviously, and investment into feed, which takes a longer time to pay back. Anyway, we are above our target most years, which is obviously great news, and we would like to continue to be there. I will end it with that, I think going forward in the big picture, the future is in the ocean, and it's just beneath the surface. There's a lot for us to gain from producing more food in the ocean. Thank you.
Thank you for that, Alf-Helge. Our next speaker out is Jon Are Gummedal, who is the CEO of Deep Sea Supply. He has a background as machine engineer. He started working in shipping in 2003, first as an inspector, and then he moved on as technical director. Originally, his plan was to become chief engineer at a vessel, but after spending one year at sea, he changed his mind and then become CEO instead. The floor is yours. Welcome.
Thank you for that. Everybody hear me? Yeah. I'm from Deep Sea Supply, and I'm going to present our new joint venture that was published today on the stock exchange. It is an exciting business for us. Deep Sea Supply have been normally serving the oil industry, and I'm not going to talk much about the oil industry today. I'm actually very happy that I don't have to talk about that at all. I'd rather concentrate on a more promising business. Of course, a few words about it. The oil industry have been in a tremendous downturn, where the oil price was dropping very quickly and at very low levels. In fact, the one barrel of oil was worth less than four and a half kilo of salmon. That was really bad times.
The oil price is going slowly up again, but we think that it will take long time before this market will recover. That's why during this time, we, of course, was looking for other markets where to employ our vessels, and we were looking into converting the vessel into wellboats. Suddenly we see that Marine Harvest said that they wanted to start a shipping company themselves. We contacted Alf-Helge and Ivan, had some meetings with them, trying to present our newly converted PSV project. Further down the road, after some meetings, we decided that it would be much better to establish a joint venture and that it will be a win-win situation for both of the companies. A little bit about Deep Sea Supply.
We are a company owning and managing 37 offshore supply vessels, serving clients like Statoil, BP, Chevron, Petrobras in Brazil, that is the biggest national company in Brazil, and many others. We have two types of vessels. We have anchor handlers that are strong working horses. I have them down on the left side there, anchor handling tug supply. These vessels are mainly for moving installations or drilling rigs from one location to another and also assist these drilling rigs to moor them at the site where they're going to operate. When they have completed with the operation, we assist them to unmoor and then to tow them to the next location. Very brief description. We have PSVs, that is platform supply vessels. They have a large deck area on the aft where they're carrying various type of equipment, spare parts.
It can be clothes, it can be salmon, it could be whatever that is needed for the production on the fields. We also have a lot of different tanks below the deck where you carry fresh water, various chemicals for the production, gas oil for the generators, and so on. These vessels are, of course, quite advanced vessels, they normally are when they are out on the field, are working very harsh environment. The sizes are more or less the same as a wellboat today, the new model wellboats. We are operating worldwide. We are mainly concentrated on Brazil, in Southeast Asia. We are in West Africa, we are in the Mediterranean, of course, in the North Sea. We have offices. The top management is located in Norway, Grimstad, south of Norway.
We have full management and chartering office in Brazil, Singapore, and we have also an office in Cyprus. Listed on the stock exchange in Oslo, our main shareholder is Hemen Holding, which is a company affiliated with Mr. John Fredriksen. He is also no surprise for you guys that he is also the largest shareholder in Marine Harvest. Why should we establish a joint venture? What we see is that this business is very fragmented and dominated mainly by family-owned shipping companies. It is an immature industry. It has been growing fast, and they have significant room for efficiency gains. We believe that together we could make sure that we have a more efficient operation, and we want to also concentrate more on all the services that is needed for the aquaculture industry.
We know that the financing cost for these operators is perceived as high, and there is an expectation for increase in demand of vessels for the future. We know also that the margins today, they are very strong on this business. Of course, this is also one important field here. For Marine Harvest, they are the largest operator or largest charterer of 44 aquaculture service vessels, and pay annually EUR 100 million in annual charter hire to the different owners. Marine Harvest also expect further growth in vessel capacity requirements over the next years. Together with Deep Sea Supply, we have an ambition to streamline the production and of course reduce the cost and be a strong competitor against the other players within this industry.
Talking about Deep Sea Supply, we have a long track record of operating vessels, of course, so that we know how to operate a vessel. We see many synergies when it comes to operating a normal PSV and a wellboat. We have also been working a lot now over the last months in understanding the wellboat service, and we have been talking with the operators in Marine Harvest. We have been talking with Yuwen, and we have been also with Doug Hunter, trying to understand a little bit more about the operation that Marine Harvest have. Now that the joint venture is established, we will of course work much closer in order to have a mutual understanding of the needs for the future. We have an established infrastructure. We have all the system needed. We have all the certifications.
We are working in different areas where we have different rules and regulations that we have to follow in order to operate. Brazil have one, Canada have another. We are not in Canada today, but we know how to get into Canada, and we have the system for this. It will not be a problem for us to operate vessels with the Canadian flag. In Norway, we know very well. U.K., we know. Chile, we don't know, but we know Brazil. As I understand, it could be somewhat similar to what the challenges that we have operating in Brazil. Of course, cost-efficient operation is maybe some doubts that an offshore company have a cost-efficient operation. Many believe that the oil industry is equal to high cost.
I can assure you, if you talk to any analysts following our company, they will say that Deep Sea Supply have the lowest cost base compared to the peers in the Norwegian industry. To reduce the cost and to keep low cost have always been the key factor for Deep Sea Supply. It goes from building a vessel to operate a vessel, so all levels. When we're building vessels, we build normally with Norwegian design, Norwegian equipment, but we build them outside of Norway. Normally, latest series we built was 12 large PSVs that we built in China, got almost one vessel every month at a time. They were very good quality. Many of them are operating in the North Sea without any failure. Working very well. At a lower cost than our competitors.
I think that is also a key factor within this industry, that you have to keep the costs down, even in good times. The new name of the joint venture will be DESS Aquaculture Shipping. It will be a joint venture that is 50/50 owned by Marine Harvest and Deep Sea Supply, where Deep Sea Supply will take care of the company, running and manage the company, and we will also manage the vessels, of course, through various management agreement. In the beginning, we will have long-time charter contracts with Marine Harvest that will also provide us a secure, attractive financing of the new buildings, which is also very important. These vessels have high costs. Some companies, they are building vessels above NOK 300 million, so to have a good financing is also a key factor here.
We will have focus on wellboats, on harvest boats, feed vessels, and service vessels. That's why we call the vessel Aquaculture Shipping. We will not only concentrate on wellboats but all the segments within this industry. We are also planning not to only work with Marine Harvest, we are also going to compete for external contracts. We have a clear strategy developing this JV to be the preferred vessel owner and operator for the whole industry. We have to show also that we can compete. It's not like we are building the vessel and get a good contract from Marine Harvest. It must be on competitive levels, and Marine Harvest, they have full right to go to other operators if they say that they are more cost efficient than us. Little bit about the wellboat market.
The global wellboat market today, it consists of 155 vessels in total, where Norway is the largest market followed by Chile. In Norway, we have 49 vessels with a total capacity of 67,000 cubic meters. Chile have 50 vessels covering 37,000 cubic in total. It is different on the sizes of vessels that are used in Chile compared to Norway. In Norway, the average size is 1,337 cubic meter, but in Chile they have 747 cubic meter only. Trend in Norway is that the vessels are getting larger. Most of the vessels that are built today is around 3,200 cubic meters, and there will come 60 new builds that will be delivered in 2016 and 2017.
I believe that they will in quite large scale, at least some of the smaller wellboats will most likely go out of business due to this and also due to the age of some of these vessels. Larger vessels means, of course, bigger responsibility. The consequences if something goes wrong on such big vessels is much bigger than when you're operating a small vessel of 500, 600 cubic meter. That's important factor here, and there we believe Deep Sea Supply is of course strong, having experience running such type of vessels. Strategy. We will gradually enter both the wellboat market, fish feed delivery vessel, harvest boat, service vessels. Harvest boat is a new concept where the fish is killed on the site. This is a concept that Marine Harvest have been working with for a while already. It will reduce the losses of fish.
You don't use the typical wellboat to transport the fish anymore. The vessel can carry more fish dead than alive. You kill the fish and it goes down to chilled tanks having some ice slurry inside, and I believe that you could carry two to three times more fish on the same size vessel, reducing cost for transportation per kilo of salmon and reduce emissions, of course. This is a new way of thinking and that we strongly believe will make the industry much more efficient. We also see that the research and for the future it will come new and larger type of equipment for on growing of fish in the ocean. We believe that these sites, they will be placed further out in the ocean where the environment could be more harsh than we are used to today.
This will also require a different type of service vessels, maybe similar to the vessels we have in the offshore industry today, but maybe more light version. They will have some of the same system in order to avoid the collisions, et cetera, with these installations. Progress. DESS Aquaculture Shipping will contract its first vessel with option for three more within June. We aim to be in the market within Q3 2017 at competitive terms. By doing this, we're going to build low cost vessels, but at a high quality, doing exactly the same as the other vessels are doing today. We are going to have a good financing. We're going to focus on the operation of the vessel, and we're going to use the economies of scale in order to have low price on the operational cost.
By doing this Aquaculture Shipping aims to change the game in the aquaculture shipping industry. That was all right on time, I hope. Thank you for listening and wish you a nice day further on. Thank you.
Thank you for that, Mr. Jon Are Gummedal . Our next speaker out is Ben Hadfield. He is COO of Feed. Mr. Hadfield holds an MSc in pollution control and environmental management from the University of Manchester. He has been in Marine Harvest Scotland for many years, and since 2013, he now holds the position of COO of Feed. Besides his two passions, fish and fish feed, he is also a very keen hunter, and he is the biggest hunter of wild boar in entire Marine Harvest. If anybody wants to take up the challenge with Ben, you're most welcome.
Kristine, thank you very much for that, and good morning. For those of you that visited the plant yesterday, thank you very much for that. We made that move now over three years ago. We're very pleased that we did. We've also found more efficiency in the plant through a process of debottlenecking, and we can state today that we've increased it by over 100,000 tons from its original design level of 220,000 to 320,000 tons. It's the first feed plant in Marine Harvest's continued integration of the value chain. It's very central to our farming operations. In fact, if you can sail within five hours, you can reach a demand level of 80,000 tons of fish feed per annum. We have specific and novel concepts for delivering nutrition to the fish.
We operate a monthly diet profile, which changes with the needs of the fish, both from a growth perspective, a health perspective, and from a fresh quality and eating perspective. We've now, since start up, produced over half a million tons. As you have some expertise from your visit yesterday, I'll not step through the entire process flow, but the point really to be made is that we have a very high raw material storage. On meals and powders, it's 15,000 tons. On oils, it's just over 13,000 tons. It gives us quite a lot of flexibility in our purchasing choices. We sought to complement this by having a high feed storage for finished product.
We can now store today over 20,000 tons of feed. We do that prior to the peak season in August and September, where we deliver significantly more than what we can produce in those months to the farms. The plant, as you saw yesterday, is situated on its wholly owned port. We're able to cater for four vessels. We can load feed at 600 tons per hour. We have a large area of land under our ownership with a very supportive commune and a very good team of people. We believe that there's significant expansion potential here. In terms of the formulation development, when we started with a brand-new feed formulation, we were fairly conservative, particularly on fish meal inclusion. You see here that in the start-up year, we were at 14% fish meal. That has now dropped to around 10%.
We believe that we can go lower. Fish oils have remained constant due to a standard requirement in Marine Harvest fish for omega-3 EPA, DHA. We have increased the use of vegetable concentrates and expellers, mainly from peas and beans. Due to the high price of soya products in 2014, we reduced our use of soya protein concentrates, and we also complement that with maize products. You'll see that supplements are around 4%, and this is quite high relative to other feed producers. Our feed is functional all the time, so we have a consistent annual profile of adding vitamins, minerals, and health-promoting products to the feed. In terms of formulation cost development, since start up, we've seen a decline in the raw material basket.
This is a function of a slight correction in marine ingredients, quite a considerable correction in vegetable proteins, and also our reduced use of marine ingredients. You see here from the graph that the cost has decreased by over $100 per ton. Unfortunately for operations in Norway, the weakness of the krona compared to the USD, and 80% of our raw material basket is taken in USD, hasn't really seen this benefiting for farming cost. The business has been profitable since its first quarter. We would focus really on the Q4 2014 result, which had the benefit of full-scale production. We also took positions earlier in the year and locked in very favorable contracts on raw materials in that period. Q1 2015 results were also good. We benefited from warm temperatures in the sea and relatively high volumes.
I would be open and say that we were disappointed by Q1 2016. That was in relation or depressed by the feed quality issue due to fat leak from the pellet. We took a lot of learning from that, and we resolved the issue in full. Nonetheless, compensation was made from feed to farming. In terms of the development of Marine Harvest fish feed, we commenced production in Bjugn slightly ahead of schedule. We set ourselves an ambitious target in 2015 of 280,000 tons, and we just about got past that, although it was an intense focus to do it just before the end of the year. We expect this year to produce 310,000 tons, and now we turn to a project in Scotland, where we expect to start construction during January or Q1 2016.
We anticipate that Scotland, in its first full operational year, will produce 170,000 tons. Okay. Actually, I spend a lot of time in Scotland, but I am English, and I know the coast here quite well. The area that we've chosen is here on the Isle of Skye. Again, it's very central to our farming facilities. It's the wholly owned area of land with the ability to build our own port facilities. We have a second option, which is here, which is also set out under an option agreement. I have to say at this point that our preferred location is actually the quarry site on the Isle of Skye. This is an area of land which is 183 acres. It has very good access to the sea, although we will need to expand and develop the pier, which is currently derelict.
On the ground, there is 8 million tons of sand and gravel reserves, and we intend to maintain a working quarry for construction of the feed mill, but also some of the major infrastructure projects that are taking place in Scotland now, such as hatcheries. The site is within a marine protection area, and we've done quite some considerable work to demonstrate that we can extend the pier and do the necessary civil works without impact to the marine protection area. Nonetheless, this will be an area of scrutiny for the regulators in Scotland. In terms of the project timescale, we had board approval for this in December 2015. We have now selected our preferred location. It's under option agreement to purchase, subject to the regulatory permissions being received, and we've already undertaken one set of public exhibitions.
There is a second set of public exhibitions, and then we intend to lodge a planning application early in Q3 this year. The feedback so far from the community and from the planning bodies in Scotland in this area has been extremely good, and we've been able to take people from the community in Bjugn that have been very positive about the development and have them liaise with the community in Scotland. We expect the construction period to be similar to Bjugn, around 15, 16 months, and we have set ourselves a target of operational during June 2018. Okay. In summary, I think the continued expansion at our factory in Bjugn is both possible and desirable, and that is the strategy that we've chosen to maintain our supply in Norway to around 80%-90%.
We've identified a Scottish site, secured it, and as it stands today, things look good from a planning application perspective. The logistics saving in Scotland is considerable. The other feed manufacturers operate on the east coast of Scotland. The feed is taken from vessels onto trucks to the feed mill. The feed is made. The feed is then taken on trucks across the country to a port owned by somebody else, and then it's loaded onto vessels and delivered to the farms. We think that the efficiency that we have here in Bjugn can be replicated at this site in Scotland, and so we see very considerable savings on the feed logistics.
The Scottish plant will have a bigger volume capacity than is required for Scotland, that is because it will do feed for Ireland, for the Faroe Isles, it will do the freshwater volume for our European operations, and it will also be a backup to supply peak season volume back to Norway. In summary, in terms of earnings and efficiency, we are confident that we can replicate much of what we've done in the Bjugn development. Okay. Thank you very much.
Thank you so much, Ben. The next speaker out is Marit Solberg. She is COO of Farming. Marit holds a degree in microbiology from the University of Bergen. Compared to the small bacterias she's normally working with or worked with, salmon is a rather big organism for Marit. Marit has been in the company for over 30 years. Amongst other positions she's had was Managing Director of Marine Harvest Norway. If there's anything you wonder about the history of Marine Harvest, Marit is a very good person to ask those questions. The floor is yours, Marit.
Thank you very much, Kristine. Yes, I'm very fortunate to be the one that can run the most interesting and fun part of our business, I think. Of course, it's not only the most fun, but it's also the most risky one. That's part of why we have spread our risk all over the world, as you know. Being in Canada, Chile, and all the other big farming countries in the world, Scotland, Faroes, Ireland, and Norway, of course. Norway, we have divided in four different regions run as separate business units, just as Chile and Scotland is. The reason for that is, of course, the size of it. Each of the regions in Norway are approximately the same size as Bakkafrost and Grieg Seafood global. It's big units all over the place.
I'm very happy to say that also last year, in most of our areas, EBIT-wise, we were number one winner compared to our peers, which was listed at least. These are in euros, so it's quite boring because the numbers look so small. I prefer it in NOK, but that's history for us. It's very good to see, and I hope that continue like this, to be honest. This is not because we are good at prices, but we had lots of contracts last year. We are not a winner because of high prices compared to our peers last year. It's because we have a rather competitive cost base all over the place, and that's a good remedy. Chile, as you see here, is really awful, and that is because of our successful acquisition of Acuinova.
When we had to realize the biomass we bought there, we had quite high costs, to be honest. I hope that they will climb and be at least number two going forward. Cost, of course, will be, as Alf-Helge said, our main focus whatever exciting new things we are doing. I think cost will always be our survival kit, not only in good times but when and if bad times are coming in, this is the best way of keeping our profitability. It's sea lice and feed raw materials that has driven the cost the last three, four years, and they are equally divided or responsible 50/50 for the increase. Sea lice, the challenge there we have to handle in a good way whatever it costs, even if we try to be more efficient.
Feed raw materials, of course, Ben is going to solve for me, so I'm very happy for that, Ben. Having our own feed production, of course, helps a lot. We can decide what to put into the feed, and we can be extremely efficient. That helps a lot for our costs. We have also, of course, lots of initiatives all over the units and in Corporate to reduce cost level or at least stabilize it so it doesn't increase further. Much of this is what we want to take out all large scale effects in all elements. We have taken a lot after the many mergers we have had, but there is still more to be done. It's about centralized purchasing, it's about standardization of all equipment in all areas and lots of other things.
We also have our own Mowi breeding program, and that sounds quite expensive, but in fact, having our own egg production gives us nearly half the egg cost than the rest of the industry have. When you add it up, it is quite a lot of money also there. We also increase smolt size. It cost a lot to invest, but in the end it will also reduce our overall per kilo cost. Being 20% of the industry, of course, we have the ability and opportunity to have a lot of internal benchmark and can then also share best practice and steal from each other between the units the good ideas for cost savings in all areas. We also have a quite extensive program for interchange of management from site managers and upwards to really get the sharing of the good ideas into the single sites.
I also think the general frugality on all indirect and administration and overhead cost is important. We do not want to get fat in good times. Just some short sentences about each unit we have. Region South is going geographically from Agder, Rogaland, and Hordaland. It's 12% of our activity. It's the business unit where we have had the successful area with non-treatment for lice for six years because of cleaner fish, and that is our proof that we have hopes that we can do that for the rest of our units and also for the industry. Six years with proof, I think that is a good one. It was also the first unit which had the ASC certification two, three years ago. Now we have 44 sites all over the world. That is 40% of the industry's certification.
Despite of a good history in Agder, we have also a big challenge with lice in this area. The main bottleneck is smolt capacity because we want to grow also down here. We have started to solve it. The Fjæra plant in Hordaland is one of the world's largest smolt plants, will be finished next year. We started building last year. Region West is our largest region, 19% of our total volume. They have delivered excellent results the last three years after some challenges with PD. They have also lice challenges. I will say this in all units, I think. They have also been bottlenecked by smolt capacity. We started building their new plant Steinsvik three years ago, and it was finished this winter and already delivering huge amount of large smolt. Region Mid, most of you heard about yesterday. I don't think I say anything there.
I told some of you that most people think that Trøndelag area is the most farming-dense area in Norway. You didn't see many sites yesterday. I think you only saw one, the one we visited. The coastline of Trøndelag is the same as Chile's Region 10 and 11 together. That shows how dense Chile is in comparison to Norway's most dense area. Region North is at the moment our best production area and cost winner this year in the group. There is potential for growth because this is mainly Nordland and also something in Troms and Northern Trøndelag. We think there is potential to grow for licenses there. They have been the pioneers in developing LiceFlusher and mechanical lice treatment, which is extremely important for us. They also would like more smolt capacity. Scotland, 12% of our production.
They have had the last two years a very challenging biological situation, both with lice and amoebic gill disease and different kinds of blooms. We have had, even if we were number one in EBITDA last year in Scotland also, the cost has increased a lot because of this. This year, we have very good non-medical tools in place. Some of you heard that in Region Mid, we can treat every fish every seventh day if needed this season. Ben has promised that he can do it in 12 days in Scotland this year, so I think we have good control compared to last year. Also in Scotland, we will start building new smolt capacity this year. Canada is a fantastic story at the moment. That is in fact the only unit that has had stable costs for the last years, so that's impressive.
Also the market being close to the nice U.S. market at the moment is fantastic. I guess it's the most challenging area we are operating in. It's lots of blooms during the autumn. There is lots of sea lions, and it seems strange that that should be a problem in 2016, but it is, and they are growing. The numbers are growing. Also in Canada, we started building more smolt capacity last year. It will be finished next year. They are 10% of our volume. It's on the West Coast, Vancouver Island. Chile, last year it was 15% of our production. This year it will be less than nine because of the blooms that took away much of our fish in March.
Compared to all the problems we always are talking about with Chile, in fact, we in Marine Harvest has a relative good biological performance compared to the other companies down there. Of course, we have our challenges with SRS recurrence as the rest. At the moment, there is a comprehensive restructuring going on inside Marine Harvest with support from people in Norway because we will have so low volume, as you can see here, less than 40,000 tons this year and also going forward, it will not be a very sudden increase. We need to adapt the organization and the assets to the level of volume. I think, or maybe we think that the main bottleneck down there is unsustainable regulatory framework. The framework allows far too much biomass on a too little area.
Fortunately, we have organic growth opportunities in Marine Harvest in many of our business units. We have invested close to NOK 1 billion only the last three years in new freshwater capacity. Huge plants, and it's mainly recirculation units. It's been done in Norway and in Canada, as you heard, and Faroes at post-smolt, and we will continue in the other areas. Also to take control of the lice, more than NOK 300 million is invested the last five years, mainly in facilities and capacities for producing both lumpfish and ballan wrasse. Much of this money is also going into pure R&D to handle the ballan wrasse. It's a very complicated marine species to farm. We are one of the few that really can handle that one, and it's maybe the most successful cleaner fish compared to the others.
Just to try to explain for those of you who don't feel it's obvious that we should use so much money into freshwater and why it suddenly is possible to have organic growth. This graph here is an illustration of a typical site with five Norwegian licenses, five MABs, which means 3,900 tons. You can grow your fish up to the limit here of 3,900 tons. Never a kilo more, you have to harvest. When we plan how to stock and do this production, we have to figure out how many smolts we can put in so we are sure that they are all harvestable size when we reach this. We put out so we can have the fishes average three kilos, for instance. We can grade them and start to harvest.
If we put in too many smolts, we will reach the limit here when it's half a kilo, and of course, that is a disaster. When it's reached harvestable size, we continue feeding and harvest the same amount every day or every week that we feed. It's like a machine going there, keeping our limits, and you feed and you harvest all the time. By this, we can harvest 2,000 tons extra on top of this limiting factor here of 3,900. Every farmer does it that way. That's not very interesting. What we do when we have bigger smolt, all this capacity here is not used of the license. Takes nearly a year with enormous smolt with unused capacity. Of course, we want to steal this volume and have more kilos out of it.
If you put out a bigger smolt, the blue line, you reach harvest size quicker, and you gain. You use this capacity and gain 500 tons extra. It doesn't sound very much, but it is in fact 100 tons per license extra. If you add that up, it's quite some volume for us, at least 10%. Of course, this example is not with a very big smolt. We are producing bigger smolt than this. Another thing I want to pinpoint is to try to explain you the very simple lice strategy handling we have because there is a discussion in the industry what lice level is the best to have. Some think it's sustainable with a higher lice level that we are predicting. We are saying at least not more than 0.2 female lice on a fish.
Of course, you have to avoid lice, you have to avoid internal and external infection. We have found out that 70%, in fact, is self-infection within a site. That means that it's up to ourself to have the main control. The good thing, the fortunate thing here, you have to hinder the lice to reproduce because if they don't reproduce, you have no new lice. Fortunately, some lice comes as females and males, and they have to mate to make new lice. It's very simple. For them to mate, they have to meet physically on one fish. If you have so little lice that they never meet, you don't have any new lice, at least internally. I think if we can maintain it so low, then we have solved a lot of this.
We have figured out with the help of technical here that if we have 0.2 lice, there is 20% of the lice in the site that really can mate. The rest don't find each other. If you have two lice, and many farms in Norway and Scotland have two or more lice, you have 100% fertilization, and you have an exponential increase of lice larvas into the ocean. I think if everybody did that, there would be nearly no lice pressure among the farms in the industry. You would have something from the wild stock, but that would be minor. In addition, of course, to have the 30% coming from other farms is that they are not doing the same.
We use skirts just to keep it physically away, and then you want to stock up all sites with cleaner fish in the event that it increases to keep below 0.2 or even 0.1. In my view, this is very logic, so I really hope that the industry can agree that this is the way forward. The graph up there is the lice level on the right-hand is the lice level for the last years in our Region North. It used to be the worst place on Earth, the first area where all the lice have totally resistance against all the remedies we have. All the years here, you see what happened last year, the whole year, the green line, close to 0.1. It was fantastic. The worst area went from one year to another to the best area.
It was a lot of work, a lot of mechanical treatment and so on, a little cleaner fish, they immediately acted when one cage was above the larva. I think that and in combination with our history in Agder, in a way proves that this logic holds. I think we are well-positioned to have some organic growth going forward, we will of course also look into increase when we can show that we have and get new NID when we have control. We can show this season, hopefully, that we have control over the lice in most areas. I think with the risk management we have and the scale and the best practice, we are well-positioned to maintain our cost leader position and to lead further development. Thank you.
Thank you, Marit. Now it's time for a short break, and we start again exactly, precisely 9:40. Please be back then. Thank you. Welcome back, ladies and gentlemen. Our next speaker out is Ola Brattvoll, who is COO of sales and marketing. Ola holds a degree of fisheries from the Norwegian College of Fishery Science from the University of Tromsø. Ola has served as COO since December 2010. Ola has previously worked in Tokyo for four years. By clear margin, he is the best Japanese speaker of the management team. The floor is yours.
Thank you very much. I think I will do this presentation in English and not in Japanese to the benefit for all, I think. I want to start off with a few words about the salmon market and from a demand point of view. I think a lot of the presentations you have seen before has been very much about the supply situation and the capacity. I want to talk more about the demand side of the equation. I want to go on talking about our commercial strategy. What is it that we do in sales and marketing and processing to achieve our goals? I want to show you our footprint, our capacities, and our activities in sales and marketing, illustrated by a couple of examples, which I think is good to show you how we are thinking and what we want to achieve.
First, a few words about the salmon market and the demand of Atlantic salmon. This figure shows the salmon consumption in different areas of the world over the last 19 years, and it is an amazing story. Looking at the pure growth, you understand that this is a protein that is increasing its popularity all over the world every year. The interesting thing about this slide is that it shows a growth in new markets, it shows a growth in established markets, and it shows a growth in different parts of the world with different eating culture, different preferences, and different consumer attitudes. It really shows the versatility of salmon as a protein and its ability to adapt to local cultures, to local needs, and to consumers in many different parts of the world.
This growth is coming and when salmon is introduced to a market, it serves different purposes. It plays a different role depending on what stage the market is in. In my next slide, I want to explain to you a little bit about that. How is it when salmon is being introduced to a new market? Normally what happens is that salmon moves as it becomes more widespread in the market. It moves from being an item mainly used in fine dining into becoming an item used more in everyday meals. What we see is that very often when we go to a new market with salmon, it is introduced through the restaurant channels and mainly through the high-end part of the restaurant segment.
We use chefs, and I think you had a wonderful experience last night with one of the best chefs in Norway illustrating all the nice things you can do with salmon. We use these chefs as ambassadors when we introduce salmon in new markets. We show the product to them, we teach them how to use it, and they introduce it on their menus. That's the starting point. When salmon is gaining popularity in that part of the segment, it normally rapidly spreads into existing channels. It means that salmon is sold through the local distribution chain, normally with local fish wholesalers sending products together with other fish species to the different outlets using fish in general. What we see is that as the market matures, and especially in emerging markets, we follow modern retail.
When the modern and international supermarkets are establishing themselves in these markets, they are looking for products that they can use to present to their consumers. Salmon, by its ability to be supplied every week consistently with a consistent quality, fits very well with the modern retail model for selling products. When this modern retail grows in the emerging markets, salmon is attached to it. It goes with the growth and the spread of modern retail being distributed into the retail segment. This we have seen in Eastern Europe. Russia was a perfect example of this. We saw it in Asia, in Southeast Asia, in China, and we have seen it even in the European markets. If you go back 20, 25 years, the same thing happened.
We first entered into the market using the restaurant channels, then it becomes more and more widespread into the retail segment. What the last stage of increasing salmon consumption is really to grow with modern retail. Once you have filled that channel, once you are in the modern retail, it's really about expanding retail and foodservice. There you have to take a different role, and that is a different challenge for us as a supplier, because then you need to be working much more actively with retail clients in order to develop new products, new concepts, to grow the category and making them able to sell more products through their stores. This is where I think the big challenge for us and the rest of the industry is going forward. It's really about expanding retail in particular, but also foodservice.
We see that in Europe, we see that in the U.S. market. We see that in the more modern parts of Asia, such as Japan and Korea. We as a company, we have to adapt to the situation in each market, and we have to work in the channels that is growing in different ways depending on where the market is. When you look at the market size and the market evolution, this is a slide showing some of the main countries of salmon consumption. It shows in absolute volume how much they are consuming on the left-hand side of the slide, the left-hand axis. On the right-hand axis, you also see per capita consumption in these countries.
As you can see here, the U.S. market is the biggest in terms of volume with 370,000 tons consumed in 2014, but only with a per capita consumption of 1.16 kg of salmon. Comparing it to the second biggest market, which is France with 150,000 tons, a little bit more than that and 2.5 kg per capita consumption, which is more than double of what we see in the U.S. Illustrating this with per capita consumption is one thing. Just to illustrate how little 2.5 kg is, if you look at penetration, that is how many of the French consumers are actually eating fresh salmon once a year or more. We have a penetration of less than 50% or around 50% in France.
It means that 50% of the French population is not buying fresh salmon in the supermarkets at all during one year. Among the 50% that is actually buying salmon once a year or more, the average frequency of consumption is around five times a year. This actually shows us that though we consider France to be one of the most developed markets, we are still at a very low level when it comes to per capita consumption. We are still at a very low level when it comes to penetration, and we are still at a very low level when it comes to frequency of consumption, comparing it with most other proteins. This of course illustrates the potential for growth in France. I think it even more illustrates the potential for growth in a big market such as the U.S. market.
Given this situation where we see a potential for growth in all different parts of the world, what is our commercial strategy? How do we want to approach the market? What is the role of sales and marketing in Marine Harvest? We see our role as being able to position ourselves in the market in a way where we can achieve a higher price or a better margin than our competitors in the market. We see basically two routes to meet that target. We either establish strategic partnership with key clients based on Marine Harvest unique capabilities. We believe that we have some unique capabilities in terms of our integrated value chain, in terms of our own feed production, in terms of our approach to sustainability, and in terms of our product from the farming part of our business.
We have many skills in Marine Harvest, which others don't have. We are leading the way when it comes to ASC certification. We are cleaning our fish oils, making our product more safe for the international consumers. We have a full traceability throughout the whole value chain, all these things is of very high importance for the global retailers. We see more and more that the global retailers are no longer only asking for the cheapest product, but they're also asking for the supplier who can help them to meet the needs of the consumers in a better way. By establishing long-term partnership with key clients, we believe that we can achieve a better margin in the market than our competitors based on what is unique by Marine Harvest.
We have some very good examples of this already, and we are seeing a development in many of our key markets where the global retailers are approaching us in a different way now than what it was only a few years ago. The second route to achieving better margins than our competitors is by using our unique capabilities and building them into brands. I think this is a journey that we have just started, and I think it's fair to say that we are not having a significant part of our turnover under our own brands. We have a few very good examples where we see that building our own brands give us better margins.
You can see on the picture of this slide, you see Ducktrap, our brand in the U.S. for smoked salmon, a high quality, high-end product which is sold in U.S. retail, and where we are currently delivering EBIT numbers of around 13% on sales, which is one small example of what potential there is to build a brand for Marine Harvest. I will later on show you an example of a brand that we are developing, especially in the Japanese market now, which is Mowi Salmon. There we are selling the product currently with a premium of 20%-30% to normal fresh salmon. Still on very small volume, still a very exclusive product, but growing significantly.
We want to follow both these paths and both these routes to create a difference in the market and to differentiate ourselves from our competitors, delivering value to our clients and delivering value to consumers, enabling us to achieve a better price and a better margin in the market. Another unique capability that we have in Marine Harvest is based on our pure scale and our pure size. This is the global footprint of value-added processing and sales and marketing of Marine Harvest. Altogether, we are in 23 countries around the world. We are having the most advanced sales and processing network in Asia for Atlantic Salmon, heavily invested into Japan, also opening fresh prepacked plants in Korea and Taiwan, and having a sales network throughout Asia supporting our business in a very good way. In Europe, we are the biggest value-added producer, present in all the big markets.
I will show you a little bit more on our European footprint later. In the U.S. market, we are having two facilities at the moment for fresh prepacked, one in Miami, one in L.A. We are opening the 3rd facility for fresh prepacked in Dallas in August, September this year, which will enable us to reach Middle America, a huge untapped potential in the U.S. market for fresh fish. We have our smoked salmon processing facility up in Maine, Ducktrap, which is delivering the brand I just explained to you.
By having this global footprint, by having this processing capacity as we have, we are better able than anyone else to supply the global retailers throughout the year, meeting their needs in peak seasons, meeting their volume demands for Christmas, for Easter, for other periods of the year where others are not able to deliver the same volumes as we are. Looking more specifically at the European footprint. On this slide, the red areas are where we have processing facilities. The blue areas are where we are having sales facilities. Obviously, where we have processing facilities, we also have a sales network. Altogether, we have 14 factories across Europe. Our 2015 turnover on value-added products in Europe were about NOK 10.4 billion. We have a processing capacity in Europe of about 180,000 metric tons of HOG salmon.
Comparing to the second-biggest processor of value-added salmon in Europe, we are about three times bigger. We are by far the biggest producer of value-added products in Europe. Outside, you saw some of our products that are supplied to European retail. We are investing heavily into developing new products for our key clients, and we have a wide variety of products in all the different salmon categories. Altogether, about 6,500 employees in 2015. Our facilities are modern and well-invested. Our hub for smoked salmon is based on the acquisition we did of Morpol, that is mainly in Poland, where we also produce most of our frozen salmon products. Our fresh prepacked facilities is basically close to the market. Frozen salmon, you don't need to be that close to the final user of the product, but with fresh prepacked, speed is of importance.
Reactivity in the market is of importance. Therefore, you need a much more widespread processing and distribution network to meet the needs of the clients in value-added fresh products. Our main markets are France, Germany, Belgium, Holland, Italy, and U.K. We supply all across Europe. A little bit further on to our value-added processing. In the U.K., we opened a facility end of last year where we are serving one of the big retailers in the United Kingdom. This has been a very bumpy road, as most of you probably are aware of, where we have had significant losses over the last months. We are expecting this facility to go break even during the third quarter this year.
The initiatives that we have implemented in order to get that recovery is that we changed the management in April, and we have now a new management structure in place. We have also deployed key resources from the group into the factory and into achieving a better operational efficiency in the factory. The three main areas of improvement, where we believe that we will be able to deliver a profitable result by the end of this year, is on yield and raw material utilization. This is, as in all salmon processing, the raw material cost is the major cost. In fresh salmon processing, normally the raw material cost is 75%-80% of the total cost of the product. Obviously, if you're not managing your yield correctly, this will give a huge impact on the profit.
This is the key for us in this facility, where we have had big challenges so far, and where we see improvements month by month now going forward. It's of course on general efficiency and cost improvement, as well as discussions with our client on improving the assortment to enable us to deliver a better yield and a better efficiency. We are confident that this will be a good setup for us. Strategically, it's very good. We have it all integrated from the fish farm to the end products with one of the best clients in the U.K. We are confident that this will be a success at the end. I want to show you three examples towards the end of how we are working.
I think in Germany, it is a fantastic story of how the market has developed from being primarily a frozen salmon market into becoming a fresh prepacked market. This is a figure showing the consumption of fresh prepacked in the German market since 2006 up to actually the end of last year. This is a real hockey stick. You can see the growth actually exploding from 2013. What happened there was that the consumers in Germany were introduced to new products based on fresh salmon. Before they had to go to the fish counter and buy whole fish or fillets from the manual counters in the supermarket, the hard discounters in Germany started to deliver fresh prepacked products such as what you can see on the picture here. This made fresh salmon more available to German consumers.
They already knew salmon, they liked salmon, they knew it was a tasty and healthy product, and it really gave them the opportunity to increase their consumption. This is continuing now, and we see that the hard discounters in Germany is actually leading on now, introducing new products based on salmon to the German consumers. We are really expecting this very nice story to continue, going forward. For us, what has happened in Germany is a great inspiration of what could happen in the U.S. market. If you remember back to my previous slide, the U.S. consumers are almost not eating fresh salmon at all. The German consumers were pretty much on the same page as the U.S. consumers back in 2007.
When this was introduced as fresh prepacked products, we really saw that the consumers reacted in a positive way, and we had a very good development in Germany. We would like the same thing to happen in the U.S., and that is why we are now opening our third facility for fresh prepacked in Dallas. As Alf-Helge already said, 78% of the U.S. consumers like the taste of salmon. It's a good starting point. Only 6% of the U.S. consumers eat the recommended seafood intake from the U.S. government. They have a very unhealthy eating pattern in the U.S., and we can help them with our products. It's a growing awareness among the U.S. consumers about the health effects of what you are eating.
We also see that young consumers, the so-called millennials, I don't know if they're really young anymore, but they are a big group of relatively young consumers. They are consuming more fresh seafood. They have a higher awareness of health. They have a higher awareness of sustainability, qualities that we can deliver through with our products. The main barrier is accessibility. It's finding the products they want to eat, finding it in a format they understand, and knowing how to cook it when they come home. We think that the great business opportunity here is really to use prepacked as a way of breaking down the barriers for increased consumption in the U.S. The U.S. logistics are extremely well-adopted to fresh prepacked. They have a very efficient logistical system throughout the U.S.
With our three hubs in Dallas, L.A., and Miami, we are able to reach the entire nation from these three facilities with a short lead time and enable us to have good shelf life for the products that we supply to the key retailers. I just played with numbers, and the graph you can see at the bottom here is what I call the German scenario, and it's actually the growth in HOG volumes for prepacked in the U.S. market if we see the same hockey stick in the U.S. as we saw in Germany. That would actually, over quite a few years, take us up to a HOG volume in the U.S. market alone of 200,000 tons only for prepacked. This is not a fantasy. This is actually bringing the U.S. consumers up to a level of consumption of just above 2 kilos per capita.
Still a very small protein in the big scale in the U.S. market. On the bottom, you can see a picture from one of our key clients, how they display fresh fish and fresh salmon in retail. To end my presentation, I would like to show you a little bit more about Mowi Salmon, the brand that we have introduced in Japan, which I think is an excellent way of utilizing our unique capabilities into creating a story that actually meets the needs of consumers in the Japanese market. Marit Solberg told you about our breeding program, our Mowi breeding program. It was established 50 years ago, and we have bred on this salmon for 50 years. It's 50 years of continuous improvements. That's pretty hard to copy. This is the fundament of the Mowi brand, which is very unique and which actually delivers value to the Japanese consumers.
On top of that, we have used our feed story, creating a special feed for the Mowi Salmon, feeding it in a special way. We have chosen the best locations on our farming area in Region West. We have adopted new technology on our primary processing in Norway, and we are using our secondary processing facilities in Japan to deliver a unique product to Japanese consumers. As I said, this product is now well established in Japan, and it shows us that we are able to achieve margins well above what the market is paying at the moment. At the moment, around 20%-30% above the normal fresh salmon in the Japanese market. To end, I would just like to show you a short movie, which is the commercial that we are using on promoting Mowi Salmon in Japan.
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Thank you.
Thank you, Ola. Our next speaker is Øyvind Oaland, who is Global Director for R&D. Øyvind holds a degree in veterinary medicine from the Norwegian School of Veterinary Science. Øyvind has been in Marine Harvest since 2000, and he has been holding the position as Global Director since 2008. Øyvind is heavily invested into food production, and in his spare time, he is an ecological sheep farmer. The floor is yours.
Thank you much, Kristine. Unfortunately, I will not be allowed to speak about sheep farming today, I will focus on R&D and Marine Harvest, which is my second hobby. There's been a competition between my colleagues today who has the most exciting job and most exciting position, just confirm it now, it's me. To head the R&D department in the Marine Harvest group is the best position you can think of as a technical person. I'm lucky to head the global R&D and technical department of Marine Harvest, highly competent and strong department. We are today 16 full-time employees in the department with six PhDs, the education and background is university degrees within veterinary medicine, aquaculture, nutrition genetics, and also engineering and marine biology.
We are responsible for five functional areas: environment sustainability, farming technology, fish health and welfare, quality food safety and processing technology, and feed and fish performance. Really covering the full value chain. Our task is to manage and coordinate and conduct research and development and innovation. It's the competency development and exchange of knowledge, and it's also the core is to develop better practices for the operations, set group policies, and minimum standards. We cannot do that ourselves. We are more than 12,000 employees in the group, and the competency is on the farms, it's in the field, it's in the operations. We work strongly through also international competency teams where we discuss priorities, we discuss challenges, we discuss focus, and we also transform knowledge into operational practices.
Our R&D expenditure in Marine Harvest group is around 1% of our revenue, if you also include the contribution to the FHF, the research fund for the Norwegian industry. In my department, we have a mission, that is to seek improvements and provide solutions. We also focus on five key areas. That is about footprint, that about production efficiency, it's new growth, it's fish welfare and robustness, and it's also product quality and safety. We support all the divisions in Marine Harvest from feed and farming and sales and marketing.
That's why you can understand that this is a very exciting position to be in, working with all the global colleagues in the group and also meeting customers and consumers in our discussions and dialogue. Our goals and ambitions are guided, of course, by the corporate ambitions and goals of Marine Harvest Group set by the GMT and the group management team, and also approved by the board. The goals of improving sea lice control, to implement 100% ASC by 2020, to strengthen salmon reputation, to ensure we have sustainable and affordable feed, to reduce production time and see. Well, that is what guide us and say what knowledge gaps do we have? What better practices do we have out on the fields in the different operational countries? How can we make use of that and implement it also in other business units?
This is all our activities and projects are centered around these goals. Just to put a little bit in context, this is well known. This is also covered by other speakers today, but knowing that salmon is uniquely effective, it's extremely effective food production. It's a high energy retention, high protein retention compared to any other livestock animals, which also makes the feed conversion low, which also makes the CO2 footprint very low for our industry. It's also uniquely healthy, and there are not many food producers that can get that support that we have on the World Health Organization and also health authorities of all countries saying and recommending people to eat more of our products. This has a great potential for growth given these conditions. There are also other characteristics of our industry that is important and is also important for the R&D focus.
We do not own our own production area, different from other livestock food producers. We farm in open environment. We see farm to farm impacts. You cannot control everything yourself. You also have to control it through the industry, and that is also why strong and strict regulations are so important for our industry. It's also a young industry with several knowledge gaps, but that also gives great opportunities and great potential for improvement in our industry. Just to focus and highlight on some of the key criteria to ensure a sustainable growth. What is needed going forward? Access to key input factors are, of course, essential. Production areas, new production areas. Where are we going to expand? That's a key question going forward.
We have to make sure that our feed raw materials are sustainable and available, that they are accepted, and that they also are cost beneficial to include in the diets. The access to know-how, education, recruitment, new people are also important for our industry going forward. We also have some biological challenges, fish welfare and robustness. The losses in our industry need to be reduced, and we also need to get on top of the lice situation and have a better control of sea lice. Everything we look on, everything we concentrate on finding new solutions, new developments, has to be cost-effective solutions, and that is also a challenge for our industry today. We see the cost level are increasing and that is also a key factor for us when we prioritize what to concentrate on. Is this solution cost beneficial?
Just a few slides on some of the topics. Sea lice control has been mentioned also previous today. I think we have to admit that we have been, as an industry, too dependent on medicinal lice control for too long, and that has led to some challenges that we today are facing. We see resistance developing for the medicines, and that has driven towards a need for other solutions. The medicine use has increased to manage to control the lice, but we are now looking more towards alternative solutions to medicine. If we look into our R&D focus and R&D projects in this area, it's both R&D, it's field testing, and it's also implementation. We are now in the transition going from medicinal control into non-medicinal solutions, and that is also the goal that drives our R&D focus.
We are involved in development of non-medicinal lice solutions like the LiceFlusher, the Hydrolicer, developed in Region North, coordinated also from the R&D and technical department, and then also transferred to Scotland, to other business units and taking it into use. We are testing other commercial solutions out there, ready to go or in the development phase. We have been involved also in the search for novel methods through the funding of the research, the Sea Lice Research Centre in the University of Bergen. We also are involved in farming and optimized use of cleaner fish. A broad range, a broad approach to find non-medicinal solutions. The sea lice strategy I will not go into that we have developed and is also in the implementation in the farming units. Marit mentioned that and went well through what that is all about.
Just to mention that it is important in the R&D that we also make applicable solutions for the operation. That is the outcome of R&D. It is not new knowledge. It's not new competency if you cannot apply it. The goal of the strategy is really to reduce lice pressure, increase the success of the cleaner fish, and then reduce the treatment needs. That is the success factors of the strategy, and we see good results and good development on this already. Mowi Salmon have been mentioned. I would just highlight that to have control of the breeding program, to have an own breeding stock is also very important for R&D because improvement in performance, in fish performance, improvement in fish robustness are the key factors that we concentrate on. Good product, good performance, but robust to diseases.
There are a lot of R&D and new development in that area on molecular genetics, genomics, making us in a much better situation going forward and really use the breeding for improvements. The last area I will concentrate on in my presentation is more what is happening on the technology platforms. As you know and are well aware of, end of last year, the Norwegian government issued a new regulation that is really an incentivized system for technological development. They came out with what they call the possibility to apply for development licenses, where you can apply for solutions that are significantly different from today's solutions, significantly new knowledge, significantly new technology. You can apply for licenses to run these operations, which also potentially can be converted to commercial licenses.
You can also convert these to commercial licenses for a reduced fee, meaning that it's a good incentive to spend R&D in these developments. Currently, there are 24 applications pending, so there's a big job for Director of Fishery in Norway to deal with these. We have four solutions that we have applied for. You have heard about the Egg. I will go a little bit more in details to this further on. The Egg is a solution. The Donut is one that we applied for, and we also have the Beck cage that we have applied for. The latest one that is announced today is also the farming in tanker. Reuse of tankers in close containment production. Before I continue, I will also show a film on the Egg, so to visualize a little bit more. The Egg, that is a solution that is an enclosed system.
It's a tank of 20,000 cubic meters and can hold and produce 1,000 tons of fish. Similar to the pens that you saw in Talsflua when it comes to productivity. It's a slightly higher density in these tanks, but the production of 1,000 tons per unit is similar to a 200-meter circle that you see out in the farm. These are 47 meters high, 33 meters in diameter. It stretches 37 meters deep into the ocean, it's deep water inlet. That is to control the environment better and also to avoid, in a better way, the sea lice challenge. We applied for 14 development licenses on this concept, it will go in three phases. It's a pilot of 4,000 cubic meters or a prototype of 4,000 cubic meters.
It's a pilot of 20,000 cubic meters, and then it's a full scale 10 tank, 10 Egg, 20,000 cubic meters full scale trial. Just show you a short video or animation of the system before I go into some of the other solutions. The Egg solution, that is an application pending. As I said, it's queuing up as number five. We hope to get a solution or an answer for that before the summer, that's depending also on the Fisheries Directorate, how quick they can deal with these applications. Another solution that we applied for, all these technological solutions are of course potential solutions to the environmental challenges that we see, and also to get access to new farming area going forward. The Egg, as you see, it's an enclosed system, a deep water inlet, and that is to protect the environment and protect the fish better.
The back cage is another application that we have in. We have applied for six Development Licenses for that system. That is a submersible offshore farming cage. That is instead of having more close to shore production units closed, it is to move out more exposed. This is a system that is submersible, so you can avoid or escape from the forces in the currents in the poor weather instead of standing against it. You can have rigid strong platform constructions that are normally pretty expensive to develop, while this is a solution that is less expensive, and you can withstand the forces by diving behind the forces. It's stronger than other known concepts due to the axial structure. It's 100-meter long system and is 24 meters in diameter, and this can also hold up to 200,000 fish.
This is also a stepwise development that we have applied for this setup. Development licenses is one system and setup for development that is available, and it's a new regulation, but we also have the R&D licenses. We've also applied for a concept on large scale industry R&D and innovation called the Blue Revolution Centre. That is an application for six R&D licenses. R&D licenses are for free. They are given for a limited period of time if they are granted, normally for five or 10 years, but you can also apply for an extension of that. What you need in the R&D license is a strong engagement from research institutions, and the concept is developed in close collaboration with MARINTEK, which is part of SINTEF on the technology side, and the Norwegian University of Life Sciences and the Norwegian School of Veterinary Science for the fish welfare and for the biology.
This is about biology and technology going together, develop technology jointly with biology and fish welfare from the start. We have the Marine Donut closed environment concept. That's also a semi-closed system where you have a deep water inlet, and this is a circular system. The tube is 15, 16 meter in diameter, and the unit itself is 55 meter in diameter. These can be put together. The application is about testing five of these concepts together, and it's also very area effective. It's produced of high density polyethylene material, and we have applied, as I said, for eight development licenses for this concept. The last one that we have out that I don't have a slide on here because it's new, it's actually published today that we applied for that, and that is farming and tanker.
That is the reuse of Panamax dock ships, and that is a way to utilize system that are going out of production, out of use from what it used to be. That is about rebuilding the tanks from six tanks at 11,000 cubic meter, and we can then produce also 160,000 fish in each of these tanks. That is also a concept that we applied for six development licenses, and that is number 24 then in the queue at the Fisheries Directorate. It'll be very interesting to see now what the outcome of these applications for development license will be. Obviously there will be a strong focus in the industry and from Marine Harvest in alternative technological concepts going forward.
There's a need for a lot of research and development to see if these are the solutions to some of the challenges and also can make it possible to further grow in different ways in the industry. Thank you.
Thank you, Øyvind. The next speaker is Petter Arnesen, who is Breeding Director in Marine Harvest. He has a PhD from the Norwegian University of Life Sciences in Norway. He has worked within the salmon industry for 25 years in various position, and Petter is going directly from this today to running the Bergen Mountain Marathon later today. I hope we all can wish him good luck in that.
Okay. Thank you, Kristine. First of all, some of you went to the farm yesterday. You were not unfortunately able to see the cleaner fish. Cleaner fish are fish that service other fish by eating and thereby cleaning their skin of parasites. This is something that is known in various oceans around the world. We know that sharks are cleaned by cleaner fish. We know that stingrays are cleaned by cleaner fish. And up here in the North Atlantic, we have found species that actually can clean the salmon of sea lice.
Oops, wrong direction. The two species that we have found here up in the North Atlantic in Norway and Scotland are the ballan wrasse and the lumpsucker. We have now started to farm these species in farms on land, and we raise them to a specific size, depending on which farms they're going to. From around 25 grams, they're put into sea cages. This is a new venture for us. We have been doing it for a few years already, but we are now stepping up our operation. Our ambition is to become self-sufficient in cleaner fish. We want to produce all the cleaner fish we use in our own farms. We don't want to take wild fish and use those in the future, and several reasons for that.
At the moment, as you will see from the bars here, we are quite dependent on wild fish. In the next couple of years, we are targeting to become self-sufficient in ballan wrasse and in lumpsucker. We have various production units along the coast of Norway, as you can see. Some of them we own ourselves, some of them we have part ownership in. They are nicely spread along the coast. In Scotland, we are also farming our own cleaner fish. There we have both our own facilities and also third-party facilities. By 2020, we aim to be self-sufficient also in Scotland. You may wonder, do these fish actually work? Do they eat sea lice? Yes, they do.
The picture behind me here now shows the stomach of a lumpsucker that was opened up, and I think they counted somewhere between 150 and 200 sea lice in this Petri dish. They do work. This is a new species, and as Marit said earlier, we have, at the moment, our biggest success story from the south of Norway, from Agder, where we now have almost six years without any other form of treatment. This is nature's own way to control parasite. I call it sea lice control invented by nature. There's no danger of creating resistance, and also related to other methods, these fish do the job without disturbing the welfare and also the growth of the salmon. There's no treatment losses or loss of feeding days. Another exciting thing about cleaner fish is actually that they themselves can be harvested as a resource. Thank you.
This is something that is being looked into various places. I know that, for instance, there is interest for lumpsucker skin in South Korea, where they actually prepare it in a very special way, and it's regarded to be a delicacy. I know that there is a company in Norway actually selling this now to South Korea. This is exciting. Maybe something for you, Ola, in the future. We also know that producing these fish ourselves makes it possible for us to produce a more robust fish. We can vaccinate them. We do not risk depleting the wild stocks. There are many good things about actually being able to produce them ourselves. There are still challenges, and this is a new species. It's not a walk in the park. There are still a lot of areas that we need to understand better.
We need to understand more of their biology and nutritional requirements, disease problems, and we need to have better vaccines and better feeds developed. We also need to optimize their general rearing conditions. That's both in our farms on land but also in the sea sites. That has been a tremendous development over the last few years that out on the farms, the guys now understand that these fish need to be followed up. They need good husbandry. They need, as was mentioned yesterday, they need to have these hides, which is artificial kelp that is put into the cages where they can actually hide. We have seen several times that salmon actually go into the hides where the cleaner fish are, and they are cleaned in the hides.
This is also very interesting. The cleaner fish, their life in the sea cage needs to be optimized in a good way. They need clean nets. They need extra feeding. Sea lice probably is just a snack for them because there's not enough nutrition just in the sea lice. If we are able to improve husbandry, it's also likely that we will be able to reduce the numbers that we actually use. That's one area that we are looking into. One issue for us is that at the moment, we are not able to account for all the cleaner fish that are stocked. This is both an ethical and a sustainability issue, and we have therefore started improvement projects to look into this. We want to be able to account for all the cleaner fish that we put into the cages.
Just to leave you with a picture, or two pictures actually. One from one of our lumpsucker farms at Bømlo, and another picture from a ballan wrasse farm at Lovisa, which is actually quite close to here. Hopefully, you can go and visit some of these farms also one day. It's really interesting to see how these species are being reared. Thank you. That's it for me.
Thank you, Petter. Last but not least, our CFO, Ivan Vindheim. Mr. Vindheim holds an MBA from the Norwegian School of Economics. Ivan has been CFO in Marine Harvest since 2012. He has a history of working with a brand that most of us associate with luxury cars, namely Rolls-Royce. I must say that fast car and fish is not a bad combination. Ivan, the floor is yours.
Thank you, Kristine, for fine words. Good morning, everybody. I've noticed this competition ongoing this morning amongst my colleagues about the funniest position. I will not even bother to try to say I have the funniest job here because no one will believe me. That being said, maybe in this audience, I have a small chance to win. At least I would claim that I have the title, the most interesting role. We are into the third month of the second quarter. Unfortunately, we cannot talk about the numbers today. We have to still talk about the first quarter results, balance sheets, et cetera. I will keep it short. Just mention the key highlights number-wise. We had the all-time high turnover in the first quarter of EUR 810 million on the back of record high prices, particularly in Europe. Our volumes were down.
As you have noticed, the prices had actually climbed to an even higher level in the second quarter on the back of lower supply. In terms of our financials, I think it has never seemed better than what the situation is today. In terms of profit in the first quarter, the range was even higher than what we are used to over the past few years. We made almost EUR 2 per kilo in Canada on the back of record high prices. In Chile, we actually lost as much as EUR 1.55 per kilogram in the wake of the algae bloom, but also because of very poor prices, particularly in the beginning of the quarter. In terms of the balance sheet, no major changes during the first quarter.
After the first quarter, as you have noticed, we have divested or sold off our stake in Grieg Seafood, 26%, with a gain of including dividends, EUR 58 million. We almost have doubled that investment during the 2.5 years we owned the stake. That will of course help us cash-wise in the second quarter. Net interest-bearing debt, EUR 960 million, so well below the long-term debt target we have. Equity ratio of 46%, which is satisfactory. Cash flow-wise, the first quarter was great from a cash flow point of view. Let's see. I was instructed to go on the lectern here, so I guess I have to follow orders. Thank you, Kristine. Cash flow-wise, it was a good quarter. The first and second quarters are the quarters we release working capital in this industry, and we tie it up again in the second half.
Our numbers were obviously impacted by that seasonality. Cash flow guidance. We did no major changes in the first quarter. We converted to EUR. As you all are aware of, we changed our reporting currency. From the first quarter, we went from NOK to EUR because our cash flow is usually dominated by the EUR. The same goes for financing, it makes sense. It makes it more consistent. The working capital tie-up for this year is quite limited, EUR 30 million. CapEx EUR 190 million. Interest expenses, actually as low as EUR 30 million. I have a graph I will show you afterwards which shows a very interesting development. I know they have a lot of bank ears here, I guess you're not too fond of that slide, but at least from a company point of view, we are very satisfied.
Tax payables at an okay level, I would say EUR 75 million, taking into account last year's profits. We also see that the corporate taxes or tax rate in Norway is moving downwards. Norway is by far our most important region when it comes to, in terms of profit. The lower corporate tax rates, the better for both the company and the shareholders. I also think it's a good thing for the economy in the end of the day, but we should not have that discussion in this audience, at least. Long-term targets of debt already we said it. Quarter dividends. Our Board increased the dividend from NOK 1.40 per share to NOK 1.70. If you convert it to EUR, it's EUR 0.18, which is equal to the underlying earnings per share for the quarter. In practice, the Board distributed the money we made.
Euro as reporting currency already mentioned. The overview of financing. We are very satisfied with our financing, not only the terms but also the drawing facilities. At the end of the first quarter, we actually had as much as EUR 545 million of free, not drawn debt. We have a bank consortium present today, DNB, Nordea, Rabobank, and ABN. Total principal amount, EUR 805 million. I think I shall take the opportunity to say thank you for the cooperation so far. You have been with us since the establishment of the group in 2006, and without you, we would not be here today. You're always there to help us. On behalf of the board, it's highly appreciated. Thank you very much. We also have two convertible bonds. One highly in the money. The conversion price is EUR 9.92. The principal amount is EUR 375 million.
I get a lot of questions on what do we do with that, and we will not answer that today. We also issued a new one last year, EUR 340 million. According to analysts, we have 0% coupon, but it's 0.125, so close to 0. Very attractive financing. We also have a high-yield bond of NOK 1.255 billion. It's in the NOK currency. With current reporting currency, we do not necessarily will continue with that one when it matures. That's not a secret for the market. I think it's okay I also mention to this audience. In terms of capital expenditures or CapEx, the maintenance CapEx for Marine Harvest as is EUR 150 million. As long as we shall grow, and that is the strategy, the capital level will be higher also going forward.
The strategy for Marine Harvest is to lead the blue revolution, which was duly explained by and commented on by the CEO, Kjell, previously today. In order to do that, you have to invest. Those two items are connected, highly connected. Net working capital, as already mentioned this year, quite low. Unfortunately, I would say, because in order to grow your volumes, you tie up working capital. This is a very capital-intensive industry, as you all are well aware of. I guess one of the biggest issues for the industry is lack of growth. I think the red bar here is a very good indicator. That's the number speaking to you. Over to our interest expenses and installments. This is an interesting graph I told you about.
We have grown a lot since 2013 from 324,000 tons, I think, to 420 something last year. We have increased our debt target. We have built a feed factory. We have done a lot. Consequently, our debt is up and obviously according to the graph, the interest expenses are down. That's a good combination. We are, once again, very satisfied with the financing and not to mention the terms we have. The challenge for the administration and for the board is to maintain this situation going forward. After Smolt, I would say this is the very foundation of our company. We are focused. I think this is also a good opportunity to revisit our dividend policy. No changes, we can do it as a reminder to us all. The overall decisive factor is, of course, our cash flow.
We operationalize it, our cash flow and virtually the same price. We operationalize it through establishment net debt target level, which this year is EUR 1.05 billion. Bear in mind that that's a long-term target. We do not necessarily have to be in line with it every quarter or every half year. We have a minimum rule that says that we are to at least distribute 75% of free cash flow. If you look back to our dividend distributions over the past few years, you will see that we have distributed a minimum of 100%. The board is focused on dividend distribution. The growth strategy is to take place in combination with giving our investors return as we go along, also cash-wise. The debt target I mentioned many times, so I will not mention it again.
The rule behind it is EUR 1.8 per kilo. We put that on the other non-farming divisions like feed, like processing, like sales and markets, like some other activities that may come up. In terms of the new feed factory we are building in Scotland, then we will raise the debt target accordingly. Much about the financial numbers, over to the fundamentals. I will not spend too much time on it here. We have already been through it in the quarterly sessions. I think also Ola has been through it. In the first quarter, the volumes were down in Europe and stable global-wise. It gave rise to unprecedented prices in Europe, as high as EUR 6.15 per kilo in Europe. Into the second quarter, it has risen even higher. I think it's up another EUR 0.50 per kilo so far on lower volumes.
We also have seen that the prices in Chile have continued to increase. Price inbox to the Chilean farmer in the first quarter was $4.36, it has now increased more than $1 per kilo. We are approaching a break-even level, which is good. The past few quarters, I would actually say years, have been quite challenging for us, not only cash-wise, but also in terms of lack of success. Canada is great. They really benefit from this. They had a great first quarter and in the wake of the prices we see now, they will report the best numbers ever this year. That was our statement in the last quarter. When you look at the continuation of all the prices in the second quarter, there are no signs of change in statement in that regard. Demand.
Well, according to Ola, demand is great, and there are very few signs out there telling something else. I think all the markets are developing well. Unfortunately, we have trading barriers in Russia for Norwegian salmon, and we have trading barriers in China. Two very important markets are subjected to large friction. It only shows that the opportunity also going forward is great. I think a saying in our industry is that the proof of the pudding is in the eating, and I think that goes for salmon as well. It is just to taste it. The rest is up to us. We have a very good product, so I think the possibilities are unlimited. I already touched base upon the supply outlook for this year. It is great. The numbers year-over-year are further down in the second quarter.
We have a rise in all the prices in all regions. It looks good for the second half as well. In terms of price in 2016, earnings, et cetera, best ever. There is not much growth to observe. I guess in order to take out the potential we have in this industry, Øyvind Oaland, we must succeed with some of the projects you are working on. We need new technology. Also our internal volume numbers, we took it down in the first quarter. The industry is down, the Mowi house is down, so that makes sense. Chile was obviously the lion's share because of the algae bloom reduced by 16,000 tons. That being said, I think what happened there actually, at least from a biological point of view, was good. Hopefully we can
Hopefully we can use that for some permanent changes down there, the last one remains to be seen. Norway was always taken down by 3,000 tons. That was it. I'm the last one out here, so I don't know, Helge, do you want to wrap it up? Kristine? I would say thank you.
You have all been very patient listening to all these presentations, and now it's your turn. We will open up for questions. First I would like all the speakers to come up here, please. Then we know that there is a lot of people watching on the webcast, and we will start by taking questions from the webcast, then we will move on to taking questions from the audience. Those of you also watching, you can still submit your questions online if you want to. Jim, you will start by reading the questions.
We have two questions from the web. The first one is from Marius Gaard, representing Swedbank. He is asking, "Regarding the 24 projects in the development concession queue, what is your best guess on what % of these that will be approved?
I think I can try to answer that, and I think the answer on that is that we don't have a guess. We have a statement from the Minister of Fisheries that he would like to come up with new solution for farming fish and that the Norwegian government support this heavily. To make a guess on percentages, we cannot do. It will be up to the Director of Fishery to approve the projects, and hopefully we can get some new technology that will revolutionize the world of salmon growth and solve the issues.
A second question from Kolbjørn Giskeødegård, Nordea. "Can you indicate an estimated CapEx level for converting tankers into farming units?
Again, it's the same as for the other projects. We will not go into details on the CapEx before we granted the licenses. We will revert to that when we have the licenses on the different projects. At the end of the day, we will select technology that reduces cost the most and that is giving us the best biological output.
Okay, we will start taking questions from the audience. Just raise your hand and either Ole Helge or Andre will come and give you the microphone. Please state your name and company clearly.
Vidar Strat, ABG Sundal Collier. There have been a lot of talk about high prices. Can you say something about the development of longer-term contract prices, especially towards industrial and retail buyers?
Maybe we should turn this over to the sales president here over here.
I just got a new title. Obviously, the high prices are giving an impact to the market. At this point, I would say that the contract market is lagging behind in terms of volumes. We see a lower activity in the contract market compared to previous years. This is mainly due to suppliers in Norway being reluctant to contract at the moment. Clearly, the contract prices are following the development on the spot prices. If you look to Fish Pool and their indications of contract prices going forward, we see record high levels on the contract market as well. This is giving an impact to the contract market significantly going forward. We expect contract prices to follow the same pattern as spot prices and establish itself at significantly higher levels than what we have seen over the last few years.
Any more questions?
Hi. Alexander Aukner, DNB. Cost-cutting potential. You speak about a lot of different initiatives, but there's no real numbers to it. I'm guessing to you, Marit, what would be the easiest place for you to cut cost, and what would the cost-cutting potential be?
I am not sure if it's the easiest one, but the one that would really make some chunk of money would be if we can control these lice and then get back to lower costs for treatments, which I think we will. Not this season. I think it might be stable or even increase short-term until we get the full control after the new strategy. I guess we can come quite further down because although we invest a lot of money in cleaner fish, it's a very cheap way of treat against lice. I don't think we will ever come back to the point of NOK 0.40 that we had some years ago, but maybe around NOK 1 if I should guess, but it will not be this year, at least.
The feed raw materials, which is 50% of the increase the last years, I don't really see. We can reduce that significantly going forward with the limitations there are in the market, even if we are good in formulation. Total potential, I really do hope for the whole industry that we should get down below 30 NOK and stay there.
More questions? I can just give a slight comment on cleaner fish, just to add on to you, Marit, because we see that like in Agder, where they have been using cleaner fish, to be honest, the cost of health treatment all included is actually at NOK 0.4. It has potential, and if we can succeed doing that. Marit is very much correct because it's a tough job to do and you cannot do it alone. It needs to be a collective strategy from the industry. That's why we think it is to a certain point sad that one of the biggest organization in this industry almost advocates for higher price levels on new concepts. I think our strategy is the one to follow here, and the potential savings are enormous in that regard.
Hi, Marek van Genderen from PGGM Investments in the Netherlands. A question from a slightly longer-term point of view. For the development of more sort of alternative supply, I'm thinking onshore or potentially even Iceland, what kind of price levels would you have to see for it to really take off? Are we there yet, or does it need to be a significantly higher level before we see that kicking in? Thank you.
We are not currently involved in Iceland and not land-based as well. We believe in farming in the ocean. We believe that new technology can solve at least a certain part of the limitation to growth so we can get back on the growth track gradually as we go on. I would say that I think still it's highly important to focus on reducing cost as we speak, land-based fish farming has been tried before many times and has failed every time the salmon price comes down. I believe it's very energy efficient and sound to produce salmon in the ocean, in the long term it will be the most efficient way and the cheapest way to do it just because of the energy requirements. If you remember yesterday, we saw the cages. They were 63 meters across, 200 meters in diameter.
They were 40 meters deep. Imagine putting that on land and imagine pumping all that water on land and the energy cost that will require. We really believe in Marine Harvest that the solution is still in the ocean. I didn't really answer your question on price level in Iceland, but then I will not do that either.
Thank you.
Any more questions? There is one there.
Knut Eirik Gjøsta from Finans. Just a question on this new joint venture on the shipping side. Have you looked into sort of the capital structure of that company and how much capital that Marine Harvest would be willing to inject into that structure in the future?
We have looked into it, and on purpose, we haven't presented any numbers today. Broadly speaking, we will apply a normal capital structure. I.e., the equity ratio will be a number you will recognize. This will also be financed as a standalone company. Consequently, for Marine Harvest, in terms of our current drawing facility, at least in the short term the capital need will be quite limited. We will then visit the need as we go along. Our boards, they are ambitious. The same goes for the board of Deep Sea Supply, so things may change, and then we will address it also from a capital point of view. At the moment, the need is quite limited. I'm not talking for Marine Harvest.
For our sake, we are more than fine with our current financing because it is only supposed to support the equity part of the capital structure. The rest we will do in the joint venture, i.e. the bank financing or other instruments. Sorry.
In terms of size of that company, you have a need for 44 vessels today, you said.
Yeah.
I don't know how much each of these new vessels are expected to cost, the ones that you will go out and build shortly. How many vessels do you foresee in that company in five, 10 years time?
Well, a very important bullet point on the slide Jon-Ole presented previously today was that we will do this gradually As we go along, bear in mind that we have charted all these vessels. In terms of duration, not all the vessels are ready for being taken care of, if I should use that phrase. I think the capital bit is not the biggest and most important factor at the moment. It's actually to get in place contracts, to get in place the right constructions, trying to do this differently, trying to change this industry. In terms of the capital, I think we have to revert to it later on when this is mature. I don't know if that answered your question, but at least it was a lot of words.
Not really, but I guess it's as close as we will get. Thank you.
Yeah, it sounds like it.
Okay. I think, yeah, the second question. This is about the elasticity of the demand from the end customers. Do you have any view on it as the prices go up? Maybe how much of it do you expect to be passed on to the end customer? How much of it maybe will just the retailers take out to their own margin? Kind of historically speaking, do you believe will lead to much of demand destruction? Thank you.
I think it's a difficult question to answer, and it will vary from market to market. I think what we have seen so far is quite promising, I would say. The French market, as an example, is heavily spot-based, meaning that there is very few contracts on the volumes going into the fresh market in France. To quite a large extent, the price increases on the raw materials has been passed on to French consumers in the fresh segment, not in the smoked yet, but in the fresh. There we haven't seen, so far at least, a significant drop in demand. It looks promising if you base it on the French numbers.
I think for many of the other big markets, we haven't seen it yet because there you have a higher contract share, so you won't see the effect of the high prices until the later part of this year or early next year. One point which I think is important to remember, too, when you talk about this is what I mentioned earlier about salmon as a protein and its impact from a consumer finance point of view or related to their income. Salmon being such a small protein actually has a very limited impact on the household expenses for food. So a price increase on an item which is consumed less frequent than most other proteins will have a lower impact on the household cost, of course.
Also, if you look at the preferences among European consumers, we see that salmon is positioned very well in terms of demand. Comparing it with, there is recently a new research on this where you compare different proteins with salmon, chicken, pork, and beef. It appears as if salmon is positioned very close to beef and actually better than beef and far better than both chicken and pork. I think you need to look at these things when you consider what will happen. I think we see a stronger position for salmon now than what we might have thought previously.
Daniel Allen. Daniel is calling from Third. Could you comment a bit on how you see the outlook for Chile over the next, say, five years? What do you expect to see happening on the regulatory side? Do you have any expectations on the new SRS vaccine? Is there anything else we should think about when thinking about Chile going forward?
I think as mentioned a little bit by Ivan Vindheim, the algal bloom took down biomass significantly. That will have an effect on biology, at least a slight effect going forward. To a certain extent, we will see that already this year in reduced antibiotic consumption and the like. Back to your questions. The fundamentals here are that the regulation has not been in place, and at least not efficient regulations. It's ended up with a lot of farms too close together. I think we will see a new set of regulations shortly, but it will not address this fully. It will be a regulation that is based on mortality per site in the different zones. If you have a higher mortality than X%, it will reduce the density you're allowed to produce on the different sites.
It's a start, but I think the most important thing to do in Chile, that is to split licenses from locations. If that is done in a good and fair way, then you could use more licenses on the best locations, and you could actually exit the bad locations.
Meaning that you get longer distance between sites, and then obviously less pressure in terms of the biology using the best sites. Today, there's no political, or industrial willingness to do this in Chile. We know there's going to be an election in Chile in November of 2017, and I don't think we'll see any changes in this regard after the election in 2017. I think in the near term, we will be challenged biology-wise in Chile. We are testing the new SRS vaccine as you asked about. It's too early to tell the efficiency of that vaccine. Saying that, SRS has not only been in Chile, it's also been in Scotland previously.
If you are able to manage your operations from a fish health point of view and from a sustainable point of view, you can exit SRS as well if you have the right operational structure in an area, which has been done in other operational countries. I'm not entirely optimistic. At the same time, I think if they now manage to move to a new set of regulation, it might be a start on something. We really hope, and we will do whatever we can to impact their choice of regulations going forward. That is, at the end of the day, what will make Chile sustainable for the long term. Long answer.
Jan Mollison from Hodler Funds. Just to follow up on Chile. Could you say something about your strategy when it comes to your own infrastructure down there? Due to the volcano, you lost some smolt facilities and now the algae bloom. How do you see going forward your investments and how you are going to move forward?
In terms of our structure, we are self-supplied in terms of smolt. Also in terms of broodstock. We have actually one contract externally on the smolt side. The structure, what we are doing right now is to make our operation more efficient in all areas. This goes also about fish logistics from broodstock to smolt to sea sites. We're making sure that we have good fish logistics on the freshwater side. We have one hatchery or a smolt production plant in Region XI. We will improve that one slightly. We will also have good operations in Region X. We will select again the best sites. We have 193 sites in Chile, we will use those sites. We will continue to process in Region XI because we are alone there, we will continue to process at least the first processing in Region X.
We see that even though the acquisition of Acuinova that we bought December of 2014. We knew it was bad fish. This was a bankrupt company. Right now, we have most of the fish in Marine Harvest is new fish in Region XI, and we are harvesting most of the fish at this moment in Region XI. That shows that the risk management to be present in both regions actually will pay off going forward. We will continue that strategy in Chile.
That seems to be it from the questions. This concludes then the presentation segment. Please just join me in giving all the speakers a good round of applause. I just want to say thank you to those watching online, and then I want to just give some practical information to those who are in the audience here today.
We will now walk back to Holmegaard to have lunch, meaning that those of you who carry their suitcase down like me will have the opportunity to carry it back. It's good exercise. Then we will head back after lunch to then take the boat to Tonheim. The scheduled boat for now is at 1:00 P.M., but we will see if we can move up the boat a little bit. I just suggest that everybody stays pretty close to Kim, who is in charge of the boat schedule. He will give you an update during the lunch to see if we manage to move it ahead a little bit. Thank you for today and see you at lunch.