Profitability and Value Creation in the Salmon Farming Industry: An Empirical Study of Medium Sized Privately Owned Companies

Abstract

The Norwegian salmon farming industry have for the past decades developed into being one of Norway´s largest export industries. With a favorable climatic environment and long traditions, the industry has good preconditions. However, the industry is unstable and troubled with biological diseases, political regulations, and volatile market prices. Previous studies have commonly looked into the larger salmon farming companies. The motivation for this thesis, however, is to look further into a group of companies that previously have not been studied in this context. Thus, this thesis will investigate the profitability and value creation among medium sized salmon farming companies. To carry out this, the study is based on both quantitative and qualitative data. The profitability analysis is based on five medium sized companies over the period from 2014 to 2019. The companies are selected based on number of concessions. Moreover, this thesis will focus on the macro environment and the competitive situation to explain factors that can affect the profitability. Furthermore, investigate the disposition of the economic- and social value creation. The results implicate that the medium sized salmon farming companies create significantly value based on the return on invested capital. Although the results also show that there are great variations between the companies. A further analysis shows that the salmon farming industry is primarily affected by revenue- and cost conditions. Key value drivers such as salmon price, production level, currency and diseases are central to the profitability levels. Despite high economical value creation, dividends are kept to a minimum. The trend is to reinvest in the value chain or strengthen the equity. The cultural background seems to strongly affect the shareholders. Furthermore, the result from this thesis emphasizes that the medium sized companies contribute to local and national value creation, and that they are important for maintaining a sustainable society