Faroe Business Report — The International Review of Faroe Islands Industry and Trade - Faroe Business Report — The International Review of Faroe Islands Industry and Trade

For Framherji, a period of consolidation is following the rapid expansion of recent years, with investments that require several years of good profits to yield returns yet still look sound and well timed.

Vessel owner Framherji had a good year in 2007 after a hectic time in the previous two years that saw the company expand dramatically into one of the largest fishing operators in the Faroe Islands. Since the acquisition of factory stern trawler Vesturvón in 2005 and purse seiner/pelagic trawler Fagraberg (then Krúnborg) the following year, things have been busy at Framherji. According to managing director Anfinn Olsen, both ships have been doing well and the two deals combined — at an unconfirmed 600 million dkk or about 80m eur — have thus far proved worthwhile, and made at the right time.

“The total investment was quite substantial and we need to have several good years before the pressure will start to ease off and we can bring the debt to a more manageable level to a point where we’ll be less sensitive to hikes in interest rates,” Mr Olsen said. “But we were lucky to get sensible contracts in place before the current downturn in the financial markets. Access to this kind of capital is clearly more difficult now and investments of that size would also be less easy to support in financial terms. So, in that respect, we have found ourselves in a good position.”

Framherji began its pelagic operations in 1997 with purser-trawler Jón Sigurðsson, at a time when there were more Faroese pelagic companies with eight licenses between them. Of these, Framherji held one and Krúnborg another, making them the only single-license operators.

“It was only a matter of time when one would buy the other,” Mr Olsen said. “Especially when pair trawling became more important and it’s preferable to control your own pair and optimize the way you work. Krúnborg’s owners announced their intention to sell and we were among those presented with this opportunity. We bought the ship at the fixed asking price and she has done pretty well since we signed the deal.”

That acquisition allowed Framherji to streamline its activities, with the powerful, high-capacity Fagraberg focusing on the blue whiting that Högaberg had struggled with, giving the smaller vessel the option to concentrate on capelin and herring, according to the circumstances.

Mr Olsen expressed disappointment at the 30-percent cut in the international blue whiting quota between 2007 and 2008, slashing the Faroese fleet’s access to the species by 100,000 metric tons, although an earlier agreement had called for a more gradual reduction annually.

“If we look at this fishery from a historical viewpoint, I’m afraid we can’t expect it to remain sustainable at more than 800,000 to one million tonnes. So, we can expect our share to go from the 305,000 tonnes we have today to between 220,000 and 260,000 tonnes, which in practical terms would give us just about 200,000 tonnes when all the deals are done.”

As for 2007, Fagraberg fished for 80m dkk (10.7m eur) in 2007, Högaberg for 60m dkk (8.1m eur), while longliner Stapin fished for its accustomed 15m dkk (2m eur). Vesturvón, with its double quota that includes that of the old Akraberg, had a good year between starting fishing in February and ending its year on the 30th of December, bringing in 100m dkk (13.4m eur).

Mr Olsen commented: “We have good cod, haddock and saithe quotas across Norwegian, Russian and Svalbard areas of the Barents Sea, and TACs have been reasonably stable. Vesturvón’s frozen-at-sea fillets accounted for sales worth just about a hundred million last year, which is good.”

Following its expansion in offshore fishing, Framherji pulled out of its activities in the aquaculture business, selling all of its interests in salmon and halibut farming to concentrate on wild fisheries.

“Right now our immediate aims are to be profitable enough to pay off our investments and for this we need to have good vessels with suitable quotas; and for this it’s important on a political level that we don’t see any changes in regulations that would limit or shorten licenses. Good ships and the opportunity to earn well are also key in keeping high standard of crews. You can’t fish well without competent, motivated officers and key personnel on board. Skilled ship’s officers are in high demand internationally and people go where they are offered the best job satisfaction, so we need to be able to attract and keep the right people.”

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