Unprofitable fishing fleets

In 2009, deep-sea fishing accounted for 1.48% of French fisheries in terms of the volume of catch landed (7300 of 491 720 tons) and 1.43% of sales (€17 M of an overall €1 182 M).

SCAPECHE (Intermarché)

Statements made by this fishing fleet do not hide its chronic structural weakness, serving only to bring out the ships’ limitations with regard to the capacity of their holds:

Scapêche, the fishing division of the Intermarché group, has just added three new, 45 meter ships, specially adapted for deep-sea fishing, to its active fleet. These vessels were on the verge of breaking even, after years of deficits and investment by the group in this sector. Their limited hold capacity makes it hard for them to target mass species such as saithe, for which the price has only recently become stable at around 1 euro.[1]

Scapêche insists more on the “viability” of its operations than their “profitability”.[2]

SCAPECHE: cumulative losses of €7,32M from 2002-2008

Analysis of the fleet’s 2002 to 2008 accounts reveals a catastrophic situation: In spite of both direct (construction subsidies, fuel aid from the FPAP[3]) and indirect (tax-free diesel oil) aid from the State, the company has recorded cumulative operative losses of 7.32 million euros over the given period, or 6.8% of turnover.

Net result, accounting for aid

Although the company received a fleet exit grant of 2.24 million euros in 2008 (for its vessels Simon Kéghian II and Mariette Le Roch I), listed in its accounts as extraordinary income, that year it made a net pre-tax loss of 3.13 million euros.

In 2008 alone, for example, the incorporation of direct operating subsidies (€0.2 M) and tax-free fuel (€6 M) would increase operating losses to €7.28 M (34.8% of turnover) and the net loss to over €9 M.

SCAPECHE’s debts

The company’s long-term debt is abnormally high. Unable to rely heavily on bank loans (€7.8 M at the end of 2008), it gets the bulk of its financial support from the Intermarché group (€20.4 M at the end of 2008). To this figure, €13 M should be added for 2002 and €3.9 M for 2005, to correspond to debts written off by ITM Enterprises (part of the Intermarché group). Despite the favorable conditions provided by the group, Scapêche still has considerable financial costs (€3.98 M in 2008, representing 19% of its turnover).

Public subsidies to SCAPECHE

For the record, it is important to note that on top of the €3.9 M euros of fleet exit aid received from 2006 to 2008, Scapêche received €2.8 M in construction subsidies from 1999 to 2001 and €3 M in modernization subsidies between 1996 and 2004. The company also benefitted from over €2 M in aid between 2004 and 2007, under the FPAP (the direct fuel subsidies given by the State), which it had to return in 2010.

In May 2009, the future didn’t look much brighter. The report given to the “Extraordinary Annual General Meeting” explained that it had been “a year of consolidation following the restructuring”, which allowed for reconstruction work to recast three trawlers of 33m in length at a cost of €1.5 million, and they expected a loss of €0.5 million for the current financial year.

THE INTERMARCHE GROUP BREAKING THE LAW: NON-PUBLICATION OF ACCOUNTS FOR 2009, 2010 AND 2011

The 2009, 2010 and 2011 accounts are not available at the Registry of the Commercial Court, despite a legal obligation for businesses to file their accounts. Rather than comply with this law, Scapêche seemingly prefers to risk a (small) fine under the Commercial Code by failing to publish its accounts.

LACK OF ECONOMIC VIABILITY, IN SPITE OF PUBLIC AID

In conclusion, it is clear that despite the distortion of its operating conditions by public aid, Scapêche is completely unviable and would be unable to survive without support from the Intermarché group (ITME, COMATA, COMASUD).

SCAPECHE (Intermarché)

2002

2003

2004

2005

2006

2007

2008

2009

2010

Cumulative

M €

M €

M €

M €

M €

M €

M €

M €

M €

M €

% CA

Turnover

13,00

12,10

12,92

15,65

16,89

15,97

20,88

nd

nd

107,41

100,0%

Operating income*

-3,21

-2,72

-2,43

0,32

0,96

1,05

-1,28

nd

nd

-7,32

-6,8%

Income before tax**

-3,97

-3,57

-3,08

-0,44

0,56

0,39

-5,2

nd

nd

-15,30

-14,2%

Net income after tax***

9,29

-3,49

-3,6

3,54

1,06

0,42

-3,13

nd

nd

4,13

3,9%

EURONOR (UK FISHERIES)

EURONOR: CUMULATIVE LOSSES OF €5.58 M FROM 2006 TO 2009

Analysis of Euronor’s 2006 to 2009 accounts shows its situation to be little brighter than that of Scapêche.

Despite direct and indirect State aid, the company displays severe cumulative operative losses over the given period of €5.58 M, or 5.2% of turnover.

Euronor received fleet exit grants of €1.95 M in 2008 and €1.95 M in 2009. Despite listing this aid as extraordinary income, the company recorded net losses for these two years of €1.36 M and €0.91 M respectively.

For example, in 2008, the incorporation of tax-free fuel (€8 M)[4]  would take the operating losses to €11 M (40% of turnover) and the net loss to €9.36 M.

Euronor received €3.9 M indirectly in construction subsidies from 2001 to 2002 and €3.9 M directly in fleet exit grants between 2008 and 2009.

The company also undoubtedly benefitted from over €4 M between 2004 and 2007, under the FPAP, which it had to repay in 2010 (this, among other reasons, led to the buyout by UK Fisheries in December 2010).

Although Euronor is healthier financially than Scapêche, the company is undercapitalized. At the end of 2009, its short-term debt (to be repaid within the year) had reached €5.5 M and equated to 86% of its net position.

Structurally unprofitable in its operations, Euronor is scarcely more viable than Scapêche and incapable of surviving without direct and indirect State aid. Brussels’ condemnation, and the obligation imposed upon French fishing companies to return the funds received through the FPAP, probably precipitated the fall of Euronor’s bank balance into an abyss from which only only a buyout could save it.

A RECONVERSION OF THE FLEET…

Euronor’s conversion of its vessels towards fisheries targeting other, non deep-sea species is almost complete. Euronor now owns only one ship (the Cap Saint-Georges) targeting deep-sea species (blue ling and black scabbardfish), mostly during Springtime. Euronor has returned to its traditional profession: saithe fishing. The fleet’s saithe catch (with a quota of 23 658 tons per year[5]) represents 90% of the French quota. Euronor obtained MSC certification for this species on 15 March 2010.

…WHICH SEEMS TO HAVE BORNE FRUIT, WITH IMPROVED OPERATING INCOME IN 2010

If the fleet president’s management report is to be believed, 2010 was a “reasonable” year, if not a good one. It is true that for the first time in four years, the company made a profit (+ €0.71 M). This was the result of an 8% increase in turnover, combined with a slight decrease in operating costs.

BUT OVERALL LOSSES OF ALMOST 5 MILLION EUROS

The same cannot be said of the net result after tax: the company made net losses of €4.68 M in 2010, mostly due to the €4.44 M provision required for repayments of FPAP fuel aid and Erika aid due in 2011.

SHAREHOLDER CHANGE

It should be noted that UK Fisheries became sole shareholder of Euronor at the end of 2010.

As cumulative losses exceeded half of capital, and the Extraordinary General Assembly of 29 June 2011 decided not to dissolve the company, but to recapitalize it within legal deadlines.

As for Dhellemmes, massive increases in fuel prices have led to a grim outlook for the future. The company is seeking solutions that will allow it to reduce fuel consumption on its ships.

EURONOR

2006

2007

2008

2009

2010

Cumulative

M €

M €

M €

M €

M €

M €

% CA

Turnover

29,82

28,62

27,44

21,68

23,45

131,01

100,0%

Operating income*

0,02

-1,00

-3,03

-1,569

0,71

-4,869

-3,7%

Income before tax**

0,00

-1,39

-3,39

-1,74

0,59

-5,93

-4,5%

Net income after tax***

-0,04

-1,70

-1,36

-0,906

-4,68

-8,686

-6,6%

 

[1] Le Marin, 12 March 2010 “Douze chalutiers français concernés au premier chef”.

[2] General Director of Scapêche, at the meeting organised by Cap Lorient with the Pew Environment Group, Brussels, 13 April 2010.

[3] FPAP: the FPAP (Fonds de Prévention des Aléas de la Pêche, or Fund for the Prevention of Risks to Fishing and Fisheries Undertakings) was created in April 2004 to help fishing businesses survive the rise in fuel prices. This measure was deemed to be a form of State aid incompatible with the common market, and came to an end at the start of 2007. Consequently, the businesses concerned received this financial assistance for their operations from 2004 to 2006. On 20th May 2008 the European Commission ordered the businesses, and not the State, to return the 87 million euros of aid that they had been given over the three years.

[4] Calculations based on a consumption equal in value to 30% of turnover, a price before tax of 0.652 euros per liter and a price after tax of 1.291 euros per liter (Source : Ifremer); given the primary materials expenditure shown on the accounts, these are conservative figures.

[5] http://www.msc.org/documentation/fiches-signaletiques/EURONOR%20FFS%20FI…

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