Are we live now? Well, thank you for attending the second quarter earnings report of Salmones Camanchaca. I have a good news and a bad news. The bad news is that we have some technical problems, and we are 20 minutes late. I very much apologize for the delay. Everything was ready one minute before the presentation, and suddenly a server collapsed, and the system went off. Very sorry for that.
The good news is that we are reporting an excellent quarter. In summary, what I would say about this quarter is this. It's a significant recovery of the biological condition of the biomass, a significant recovery of the profitability therefore, although still affected by some surviving fish of the previous year, algal bloom affecting the cost as we sold those fish.
Overall, an excellent quarter. In fact, I would say, firmly that this is the best second quarter ever made by Salmones Camanchaca, both in terms of harvest, sales, and certainly, EBITDA. It is the best second quarter that we've had in our history. Almost $26 million in EBITDA, as we will see now. A bit more than 12,000 metric ton harvest, 67% above previous year's quarter and, 66% higher EBITDA. Very good quarter. That's the summary of this. What are the highlights of this quarter other than the profitability that I just mentioned? Prices were extremely good for the company. We were able to get and capture this excellent moment in the market.
The sole impact of prices is about $22 million in the quarter versus the second quarter of 2021. Almost double the harvest of the previous year's second quarter and 36% growth in sales volume. Also, not necessarily due to the larger scale and volume, but also lower cost at harvest and farming too, so very good. Certainly a much better oceanographic condition in the southern part of Chile. It was a sunny summer, but it quickly became a very rainy autumn. It has been very rainy throughout the winter. We've come back what I would call a normal autumn and winter time. That's very good for the fish.
That translated into a much better performance of the fish and the biomass in the water. That was very good. We have a few extraordinary mortality, but in the normal ranges for the business. As I mentioned, prices were at the maximum that we've ever seen for the period. Very good year for the price. Lower ex-cage cost in Atlantic.
It's mostly related to the very high level of 2021, which the second quarter of 2021 was an awful quarter, as you may recall, due to the algal bloom and the oxygen situation that we had in several of our ocean sites, so this was a very good condition in general. I wouldn't say very good. I would say normal for the standard we've had in the past.
What else? The EBIT per kilo was $1.74 per kilo. That's a very good. The Pacific salmon was also very good, more than $1.6 per kilo. Both the Atlantic salmon and the Pacific salmon did very well during the quarter. We had a more aggressive than anticipated harvest plan during the quarter in order to capture better the higher prices that we were looking in May and June. We sort of envisioned that that was going to maybe reduce the guidance for the total year in terms of harvest.
However, the good performance of the biomass meant that the biomass caught up, and we keep now the guidance for the year of about 51,000 metric tons-52,000 metric tons of both Atlantic and Pacific. As mentioned, revenue significantly recovered as a combination of 93% increase in the price achieved by the company and 36% growth on sales volume.
Both higher prices and higher sales were also the result, as I mentioned, the result of the decision we made to anticipate some harvest to catch up later in the year with a good performance of biomass. It was a good plan in order to capture the higher prices. Quarterly EBIT was $21.2 in the graph that you may see now.
There is a mistake in the graph, as you may recall, because the EBITDA, it's really the EBIT there. EBITDA was almost $26 million in the quarter. The EBIT was $21.2 million. That number there is the EBIT, not the EBITDA, but very good performance, as I mentioned. We kept this quarter the guidance for the year. The volume is stable in the coming two quarters. A little higher in the third quarter and a little lower in the fourth quarter. That is something that we anticipated, that to have a more stable second, third and fourth quarter of the year without the ups and downs that we had in the past.
The second half of the year, we'll be in the 13,000 metric tons-14,000 metric tons harvest in the third quarter, and a little lower in the fourth. Stockings are developing as expected for the year. Reducing a bit the stocking of Atlantic salmon and increasing the Coho or the Pacific stocking.
This is in line with the strategy of de-risking our exposure of fjords, another location of the tenth region, the Los Lagos Region, and moving a little south to the eleventh region. Utilizing some of our ocean sites in the tenth region with the Coho species, which does not stay in the water during the summertime. We harvest the Coho in the spring, at the end of the spring. So that's the reason.
We've explained that in previous reports. Moderate, very moderate growth on industry stocking. Only 3%-4% growth in stocking overall in the industry this year. This, I would say, is very moderate, given the attractive prices that we are looking at today. Manuel, you may follow up.
Okay. Good morning. Now we are going to cover the operational review. First, as Ricardo mentioned, we have very good biological indicators in general. We are having very good oceanographic conditions since the end of February this year and have maintained very good, allowing to have very low mortality levels, very good conversion ratio, and very good biomass growth during the first half of this year, and especially in the second quarter also.
As you can see, the overall biomass mortality is in very low levels since the third quarter of 2021. Also it's important to say that in the overall biomass mortality, we are below the industry average since the Q3 of 2021. Very good performance.
The closed side mortality for Q2 also is in a very low level. The feed conversion ratio is improving very, very well at 1.09, as well as the yield, kilos per smolt, that is 4.4, and also the harvest weight, that is 4.9. It's important to say that this good evolution of the biological indicators is in part because of the good oceanographic conditions.
In other part, because an important strategic initiative that we are implementing in farming. That is an initiative that we call the Farming Excellence Initiative. That has mainly four pillars. The first one, we are working with the human resources, attracting new talents at critical positions at the organization and also a training program.
Second, we are conducting a feeding improvement in order to increase the growth and reduce the conversion ratio. We are also using a special software with artificial intelligence to support the feeding through pellet detection and mass behavior analysis.
Third, we are also working with the sites engineering and infrastructure in order to improve the planning of the sea farms operations and also to develop technical studies to improve all of the infrastructure of the sites, including nets, moorings, and accessory equipment.
Finally, of course, we are working a lot in the sanitary strategy in order to reduce the mortalities, in order to reduce the diseases, to reduce the antibiotic usage, and also to start with non-pharmacological sea lice treatments.
The biological performance is a combination of the good oceanographic condition and this farming initiative. Because of that, of course, we are having a very good live weight cost for the quarter, $4.05. That is below the previous quarter and 18% below the same quarter of the previous year, that it was affected, of course, by the algal bloom, as Ricardo mentioned.
If we compare the second quarter of this year with the second quarter of 2020, that is the comparable year in terms of the cycles, you can see that we are $0.73 above that. It's important to say that based on our estimation, 50% of that is because of the inflationary pressures of the feed price, and 50% of that.
The other 50% is because other inflationary pressures, services, oil also, plus some other additional operational costs. In relation to the feed price, that is the most important price in farming. As you can see in the upper left chart, you can see that the feed price evolution in the last two and a half years. It's important to mention that we are having a very important increase of the feed price since the Q3 of 2021.
What is the good news for salmon? Even though that price increase, you can see in the other charts that the feed cost basket for the other competitive proteins increased more or less the same for poultry, pork, and beef. In the case of salmon, we have a better Feed Conversion Ratio compared with the other proteins.
The feed cost share as a percentage of the total production cost is lower in the case of the salmon. We are in a better competitive positions against the other competitive proteins in terms of the evolution of the production cost. The total cost, this is farming plus processing, $5.35 in the quarter. That is below the previous quarter and, of course below the same quarter of 2021.
In terms of processing, that is basically well, both primary and secondary processing, in the quarter was $0.99. That was in line with our target, long-term target of $1 per kilo, and of course, well below the same quarter of 2021. Same as farming, we are also having some cost inflation pressure.
It's important to say that in the last 12 months in Chile, the inflation is 12.5%. At the same time, we are having some devaluation of the Chilean currency of almost 30% in the last 12 months. In our estimation, our Chilean currency costs are more or less between 30%-35% of the total production cost.
Let's go to the markets. As you can see in the chart, the prices remain at a very high level because we are having mainly a low industry supply, both from Chile and also from the industry in the first half. During the second half, of course, we are going to have a very moderate growth. In Chile, it's only going to be 1% growth in the second half, and no growth for the whole year, 0%.
We anticipate that prices will not ease too much going forward. However, of course, there are some economic indicators that may generate a decline in the economic growth and may put some pressure into salmon prices. In this context, it's critical our processing, sales, and market flexibility to look for the market's formats and products to achieve higher returns.
That was the half of this year, and especially in the second quarter of the year. As you can see here in this graph, the price achievement of our product base compared with the market, with the Urner Barry reference, the price realization following an upward trend as market price rises during the first half. That is the first point. Second, we are a little lagging behind in line with our value-added strategy with more stable prices in general.
Whenever the prices are going up, we lag behind, and when the prices are reducing, we stay higher. That is the case of May and June of this year when we beat the benchmark. We have a greater flexibility. We increased in May and June our sales volume, and also we increased our share in the fresh format to capture the highest spot market prices.
That was especially in the American market that in the quarter represents 50% of our total sales. Driven by an important increase of the fresh sales in order to capture the highest spot market prices. The second market for us was Mexican market, with 18% of the total sales. We still are an important and leading provider of portion.
That is a format that explains 35% of the total sales in the quarter. One word for Coho. As Ricardo mentioned, we have a very good first half for Coho with an EBIT per kilo of $1.75. One part of the explanation of that, of course, is a very good performance, biological performance, very low cost, and very high harvest weight.
But at the same time, what was very important was the marketing and sales strategy for Coho. The marketing strategy for Coho aims to first develop new markets out of Japan, that is the traditional market for Coho, and we succeed on that. As you can see, the American market is 29% of the total market sales for the first half, followed by Mexico and China. Then Japan with only 15%.
That is the traditional market for Coho. The same for the product mix. As you can see, 46% in fillets, followed by portion with 15%. The H&G format frozen, that's the traditional format for Coho, was only 40% in this product mix. This was critical and crucial to obtain higher returns for Coho strategy. In terms of sustainability, in general, good evolution of the indicators.
First one is the Fish In:Fish Out ratio that is well below one, and with an important improvement in the second quarter to reach 0.45. We have a little increase in the antibiotic usage compared with the same quarter of the last year, but a reduction compared with the second quarter of 2020, that is the comparable year in terms of the cycle.
The reduction of the mortality is very important, 8% in the first half for closed sites, compared with an industry average of 14.6%. The same good evolution for the economic feed conversion ratio that was 1.26, compared with an industry average of 1.34.
Finally, the growth, that is specific growth rate, SGR, was above the industry in 0.79, which compared with an industry of 0.70. Good evolution of the sustainability indicators. The same for the ASC certified biomass that we completed in the first half, 71% of the biomass certified by this standard. Our goal is to be over 50%. Also, in the first half, the reduction in the antibiotic use compared with the previous year, and we reached to a 529 grams compared to 700 grams per ton produced. In general, also good evolution in sustainability indicators.
Thank you, Manuel. Well, this is one of the occasions where there is little to say, more than what we have already said. The EBIT $36 million improvement, as I mentioned, mostly explained by achievements in higher prices. Now, that does not necessarily mean that bread was coming from heaven in the form of higher prices, because there is a lot of marketing activity in order to get and capture these prices.
Also production and harvest decision in order to rightly capture this good timing for the price. There is more than just prices in the quarter. Extraordinary mortality had an impact of about $4 million during the quarter. That is half of what it was the previous year.
The cost of goods sold was still impacted, not significantly, but about maybe $0.11, something like that, in the quarter of the implication of the sale of the last surviving fish of one ocean site that was affected by the algal bloom of 2021. At the time, the smaller fish now were harvested. That was certainly an influence on the cost. Second, the inflationary pressure that Manuel mentioned also put pressure on costs, and the favorable contribution of the Coho. That's mainly on the EBITDA side. On the P&L, what else can we say? Well, the trout business had not performed in terms of the result as we anticipated.
It has a negative contribution on the non-EBITDA result of about $700,000 compared to $200,000 positive. It's almost a $1 million reduction on EBITDA due to the trout business. That was one thing. Also important was the increase in financing, the cost of the debt utilized by the company is higher, not significantly, but higher, and that is reflected in the P&L.
On the cash flow, very positive cash flow, operational cash flow. However, we use part of that cash flow into the investment plan, which is now deploying all the resources for the de-risking strategy that we have anticipated earlier, moving Atlantic salmon farming southward to the 11th region and also introducing more of the Pacific salmon species in the 10th region.
That strategy had investment implication and also the de-risking strategy of more devices and technologies in the ocean sites in order to prevent incidents related to oxygen and/or algae. We are looking now at the deployment of that strategy. Cash flow was also utilized to reduce the usage of our leverage financing facility.
That is mainly the financing or the financial implication. Some words on the Chile Atlantic harvest condition. As we mentioned, we anticipated that during the first four or five months of the year, we were going to have a negative growth or a decline in the harvest of Chile, and that was the case. We also anticipated that in the second half of 2022, Chile will recover some of this reduction in production. Overall, we see no growth in Chile during 2022. However, we definitely will have growth in the second half. That will impact the price as we have already detected that in the market. There has been what?
From the peak of June about maybe $1 decline in prices during July and has kept at that level during August. We anticipated some further decline during the year, not substantial, but further decline during the year. Overall, the prices will certainly be high compared to historical levels. That is part of the explanation of the harvest strategy that we've been following, so that for Chile.
In terms of our growth going forward, Manuel is already deploying that plan in terms of preparing the eggs, and the alevins and all the freshwater production in order to get to this number that we are looking. We have, I would say, almost all the 2023 harvest already in the water.
Correct.
We are preparing in the freshwater, the 2024. These are numbers that have behind the eggs and the alevins and all that. We plan to get to our potential of 65,000 metric tons-70,000 metric tons in about two years time. That will contain a much larger fraction of Pacific salmon that we have had in the past. Well, in summary, prices very important in the quarter.
The Coho very important in the quarter in terms of the contribution and mostly for the future of the company and the use of our assets in the tenth region. Much better performance. I would say normal performance in the quarter in terms of biology and farming performance. Cost will continue to normalize in the coming quarters.
In fact, we believe that given the condition of the ocean and the biomass during July and most of August already almost all August, we anticipated a normal condition also for the third quarter that will translate into normalization of cost in the third quarter of this year. Finally, the plan in terms of harvest for the year is kept without change in the 53,000 metric tons approximately recovering from the 2021 incidents. With that, we're finished. Thank you for attending, and maybe there is questions.
Do you see any questions?
I don't see any question here. Let me see.
There are some questions, one coming from Felipe Santiagosa. Considering your contract structures in sales and growth we've seen in pricing during the third quarter, should we see more resilience in Salmones Camanchaca realized price during the second half of the year?
Yes. Certainly, yes. It's not so much the contract strategy of the company. It's more important the advocacy for value-added that we had. When you get into the value-added world, very different from the H&G strategy, you get into clients that appreciate the fact that you have stability both in the procurement of the product and also in terms of the condition.
Meaning that you have more stable prices throughout the year and also stable clients and accounts for our product. Salmones Camanchaca is a company that have a great advocacy for value-added, and therefore long-term relationship with our accounts, and therefore stability in our trade condition. It's not so much the contract, it's a strategy that is behind that.
That strategy, when the commodity price of the little value-added product jumps to the roof as we saw this year, we obviously lag behind that, as you saw in the graph that was shown by Manuel. The other side of the coin is that when a market decline, we keep more stability, and therefore we overperformed the benchmark. The answer is yes.
Two questions from Carl Emil. The first one is, you mentioned that cost per kilo is still impacted by algal bloom in Q2. Should we thus expect costs in Q3 to be lower than in Q2?
Just let me answer that, Daniel, and we'll get into. The late March, early April 2021, that is five quarters ago, we have five ocean sites affected by algal blooms. The smallest fish affected five quarters ago were big now and was harvested, the last one in April.
Yes.
This year. Therefore, sales, cost of goods sold was affected in the second quarter by this last fish affected by 2021 incidents. There is no fish in the third quarter that was going to be sold that was impacted by the cost of these incidents of 2021. Certainly, yes. That's the answer, yeah.
The second question is, what kind of non-pharmaceutical?
Sorry. Just one word, Carl Emil. However, the feed cost has been growing.
Yes.
There are other inflationary pressures on other services. The combination of a very substantial reduction in cost due to the absence of algal bloom will be balanced to a certain extent by the increase in the inputs necessary to farm the fish. What will be the final conclusion? I invite you, Carl Emil, for the next earnings report, and we'll find out then.
The second question is, what kind of non-pharmaceutical sea lice treatment are you doing?
Manuel, yeah. Well, maybe we can talk in these few minutes. We inaugurated in the second quarter of 2022, the newest well boat that contains several of these.
Devices, huh?
Yes. Exactly. We started with the new well boat in June this year. The idea is we are now preparing to use the full capabilities of the well boat for non-pharmacological treatments. The well boat is equipped with an RO plant in order to do a fresh water treatment, and also is equipped with an SFI mechanical system for delousing. That is the main tool that we're going to have in order to conduct this sea lice treatment. Also, we have an agreement with a special boat that is called Salmoclinic, that also has some capabilities to do fresh water treatments.
Peroxide, for example.
Also hydrogen peroxide.
Mm-hmm.
Yes. That's it.
Ignacio Silva: Do you think high prices in Q2 affected demand? And what kind of factors are you seeing in the market to make you anticipate softer prices for the rest of the year? Well, a higher price is the expression of the condition between supply and demand. Demand was very strong in the second quarter. Supply was very weak in the second quarter. The consequence of that was an increase in prices.
Put it in another way, the fact that the supply is extremely inelastic in the short term mean that if you have a lower supply, then you need to reduce the quantity demanded? That's the other side of the coin of the limited supply. Going forward, I think that in the short term, again, the supply is very inelastic. It's completely inelastic.
Not totally, because you can anticipate harvest or delay harvest. There is some elasticity on the supply side in the short term. Overall, it does not last for more than maybe one or two months. Very rigid supply. We know that the supply in the second half of 2022 will be 15% more in Chile than in the second half of 2021. There will be additional supply available in the market compared to the second half of 2021. Therefore, we see weaker prices. Now weaker prices in a context of very high prices. Overall, I think it's a bit more normalized. The other important thing is, Ignacio, that the context of these higher prices and how.
The ability of the demand to absorb the higher prices. What do I mean is that as Manuel put it in a graph, which was very appealing in my view, the inflationary pressure on cost of feed ingredients affect differently the different proteins, depending on how important is feed in the cost of that protein.
If you can compare chicken, pork, cow, salmon, and the other competitive proteins that you can cultivate, you see that salmon has an advantage because the feed has a lower fraction of the cost. A pressure on ingredients of feed for any protein affects less salmon than other protein. In that respect, it is more competitive in an environment of higher prices for the ingredients of the feed.
That translated into the fact that the prices of the other proteins have a lot of pressure to increase their prices, and therefore the consumer today is confronting the decision of buying a salmon that is more expensive and other proteins that are also more expensive. The other proteins are less competitive than salmon when feed ingredients prices are putting pressure. My view is that we are well-positioned as a protein, as a seafood protein, in this market condition.
Daniel Laukås, regarding your implementation of commercial strategy for Coho, could expand more, please, to understand better if you are working on marketing strategies with the end consumer or with restaurants or retailers?
Well, that is something that I would prefer not to reveal, as it's part of our advantages in the marketplace. That should translate it into more stability on the prices of the Coho. Historically, Chile has sold the vast majority of the Coho production in Japan in the form of whole fish. We are taking a different path, and that should translate into the stability of our margins in the future. I hope to prove that with numbers in the coming quarters.
Okay. Very well. Thank you. Again, very sorry for the delay in starting. It was a server that collapsed, and therefore it was completely out of our hand. Manuel and I was very early in the office. Hope to see you in the next earnings report.
Have a good day.