Expansionist Polish firm becomes third big foreign player on Shetland salmon scene

Shetland has a third foreign salmon farming giant to rival Hjaltland and Scottish Sea Farms and this time it is not Norwegian.

The ambitious Polish company Morpol is the biggest salmon processor in the world and has burst onto the local scene by taking control of large farms in Unst, Yell and the West Side. They have been acquired as part of larger deals to buy Norwegian and Orcadian fish farming interests for around £112 million.

Last night Morpol pulled off a bold move in taking over the long-established Norwegian company Marine Farms, owners of Lakeland which has farms, a hatchery and a factory in Unst and Hoganess Salmon’s sites in Vaila Sound and Gruting as well as smolt hatcheries and salmon farms elsewhere in Scotland and Cumbria.

Morpol had announced its arrival last month with the purchase of Mainstream Scotland for £37 million, which it will now merge into Lakeland. That acquisition from Norwegian operator Cermaq included the former Shetland-Norse fish farms off Yell and Aith as well as control of half the salmon output of Orkney.

It marked Morpol’s entry into the business of farming fish for the first time after 14 years just processing the raw material. It quickly added two smaller Orkney farms – the last of the islands’ independents, Westray Salmon and Rysa Salmon, for over £5 million.

Morpol expects to go from zero to potentially 25,000 tonnes of salmon production through its flurry of investments.

The dramatic changes for Shetland and Orkney come as the international salmon industry sees another period of major consolidation, stimulated this time by record profits and record salmon prices rather than the debt and depressed prices which were a previous driver of change.

Marine Farms has been reporting record profits from Lakeland’s operations in the UK, as have the Scottish Sea Farms owners Lerøy Seafood and SalMar, while Hjaltland’s owner Grieg Seafood has reported “continued strong improvement in profitability” from Shetland which has contributed to the group’s best-ever quarterly results.

Morpol’s purchase of Marine Farms (expected to cost £70 million to complete) gives it a big company with a turnover of £92 million which has been involved in fish farming since 1976 and also farms sea bass and sea bream in the Mediterranean and cobia in Belize and Vietnam.

Marine Farms has had a dramatic week, having seen Cermaq acquire the biggest single shareholding only for it to sell up again in a matter of days to Morpol.

On the Shetland salmon scene, Hjaltland is still the number one with about 40 per cent of annual production, which is expected to be around 40,000 tonnes of whole salmon harvested in 2010.

Scottish Sea Farms and Morpol are the two other big boys leaving just four other mainly locally owned farmers with fish still in the water: Balta Island Seafare and Uyeasound Salmon in Unst, Thompson Brothers in Yell and Bound Skerries. A fifth, Skelda Salmon, has no production just now due to fallowing requirements after infectious salmon anaemia in Scalloway/Weisdale area.

Observers predict that Shetland will ultimately end up with just two foreign giants in control rather than the three who are competing now.

Morpol is looking to benefit from some of the advantages of being a salmon farmer rather than solely a processor trying to contend with paying record prices for its raw material. Last year it processed 66,000 tonnes of gutted salmon so has a voracious appetite for raw material.

The foray in fish farming is also seen by Morpol as a way to penetrate the UK and French markets and increase its presence in the United States.

The company began life in Ustka, Poland, as a canner of cod livers but now has the largest factory for processing salmon in the world. In 2007 it took over the smoked salmon producer Laschinger Aqua Group, which used to own salmon farms in Shetland, and the Lerwick Fish Traders factory, from 1998 to 2001 before selling out to what became Hjaltland.

When it acquired Mainstream Scotland, Morpol said it intended driving down costs in Orkney and Shetland by at least 10 per cent through increased production, economies of scale and better use of raw material.