Salmones Camanchaca SA

SGO:SALMOCAM

Earnings Call Transcript 2021-Q2

[Ricardo Garcia Holtz, executive]

Good morning and afternoon for those that are following us in this midyear earnings report. A period in which we faced many challenges particularly in the last quarter, the second quarter, which we are now reporting. We expect that during this presentation that I will do with Manuel, the Managing Director of Salmones Camanchaca, we were able to explain the impacts that we suffered in the second quarter, particularly, and how the company is entering into the recurring mood that we envision for the second half of 2021. What are the highlights of this quarter? First, I think that is undoubtedly the most biggest challenge that we face was a long adverse condition in one of our main Fjords in the 10th region called Renihue, where we had prolonged algae presence and deficit of oxygen in the water. That generated problems in the feeding plant, also deficits on the oxygen level underwater, which ended up in diminished growth of the biomass during the quarter or, I would say, during the whole semester, first semester of 2021. That left the harvest waste coming from the Renihue Fjord at a much lower level than normal. In fact, during the second quarter, about 60% of our harvest were coming precisely from the 3 sea-sites that we have in the Renihue Fjord, which were planned to be harvested during this first half of 2021. That obviously generated a very large impact on the cost of the fish harvested, which you have already seen in the P&L and the earnings report that we have just published yesterday. But also, very unlikely, during the second quarter, at the end of the first quarter actually, and at the beginning of the second quarter, we have an unprecedented extraordinarily very unusual algae bloom in a second Fjord we have a little north of the Renihue Fjord in the 10th region called Comau Fjord, where we had 4 sea-sites. That are being farmed during 2021 and we harvested at the end of 2021 and early 2022. That was a very large algae bloom that affected more than 3 million fish that we had at that Fjord of which we lost about half of that. Unfortunately, that was a very important event for us. The majority of the impact of the second bloom, which was a short time, very sudden strong bloom, harmful bloom was mostly registered on the first quarter of 2021. Of the direct impact of $15 million of that second bloom, about $12 million was already registered in the first quarter of 2021 and only $3 million were registered in this second quarter, but was a very large condition for us in the quarter that affected our earnings during this quarter. The lower biomass that we harvested from the Renihue Fjord because of mortalities throughout the last 6 months as well as the lower harvest weights also generated a much lower volume at the processing plant, both the primary and the secondary plant. And therefore, a much higher cost of processing, and you can see at the earnings report a much higher processing cost for the quarter and the semester. That is a very temporary situation because of the low volume harvested and therefore, processed. This was balanced or mitigated in a way and partially by a much better price achievements and price condition in the market as a consequence of 2 elements, which I think that are important. First, a much limited Chilean supply to the market as well as a very robust demand. The retail market kept at a very high level and the food service reopening throughout the world impacted substantially the price, and there was a very important and substantial recovery on the market condition. Not completely captured by the company because of our value-added production strategy and the agreements made by major key accounts, particularly in the North American market that fixed the price for a certain number of months that generated a certain lag in the price achievements. So that was very also important. We envisioned this adverse condition that we faced during the first half, gradually removing during the second -- third quarter of 2021, normalizing at the end of the year 2021 and fully by 2022. This was a very significant obstacle and accident for us in the oceanic condition of 2 Fjords in the 10th region, but it does not change the capacity and the potential of the company going forward. Also, on the positive side, despite the third or the fourth COVID wave that Chile faced during this quarter, the company was kept fully operational during this quarter with no fatalities and more than 75% of our employee fully vaccinated and 85% with at least one doses. So that reflected the resilience of the company to confront such a large challenge of the pandemic. As I said, the harvest volume dropped about 40% in the quarter. However, sales dropped only 7%. As we reduce inventories significantly, more than 2,000 metric ton of inventory were reduced in the quarter and inventory that was built up in the fourth quarter of 2020, when the prices got the historical lows. So from a financial point of view, it was a very a wise strategy to build up inventory in such a low price environment at the end of 2020 and be released, particularly in the second quarter, where we also have low volumes, harvest volumes available, so that helped the revenues and the P&L. Prices were almost 12% higher than the same quarter of the previous year. And it was in line with the pre-pandemic level. That was a very good recovery of the market. The quarter embraces the worst of 2 major challenges for Salmones Camanchaca during the last 15 months. Prices were only gradually recovering from the pandemic situation that affected the company in 2020 and early 2021, mainly by reducing the price that we sold our product. And some of that were kept during the first half of 2021. That was one major challenging affecting us in the year between April 2020, and I would say, March 2021. That was one challenge. The second very large challenge was the blooms, the blooms that we have in the Renihue Fjord throughout the entire first half of 2021 that impacted severely the cost of the product and also the one-time impact of the Comau Fjord bloom. Those 2 incidents and events that affect the company were reflected mostly in the second quarter of 2022. They were combined and this is why the numbers are what you are looking. And therefore, the EBIT and the EBITDA were negative, not surprisingly for us. On the positive side, negative bottom line was half of what it was in the second quarter of 2020, influenced by something that we sometimes do not look, which is the fair value, but the fair value was negative in 2020, in the second quarter of 2020 and was very favorable on the second quarter of 2021. That reflects a very different trend on the market and the prices between the second quarter of 2020 and the second quarter of 2021. While a year ago, we were facing a very sharp decline in prices that bottom at the end of 2020. In the second quarter of 2021, we are seeing a sky rocketing price increase. Now the average is not so different. But the difference on trend is very substantial. And that was, I think, a very positive takeaway of the quarter. Let me hand it out the presentation for Manuel, which will cover the operational review of the quarter as well as the market condition for our product. Manuel?

[Manuel Arriagada Ossa, executive]

Hello to everyone. Thank you, Ricardo. I will start with the operational review. Okay, so first, the evolution of the ex-cage live weight cost. As you can see in the graph, we have a very high second quarter live weight cost at $4.92 per kilo heavily impacted mostly by harvest came from 3 sites of the Renihue Fjord, as Ricardo explained. 60% of the harvest in the second quarter came from that Fjord that was affected by algae bloom since November 2020, decreasing the feeding plant and generating high mortalities. Thus, we obtain lower biomass and very low average weight, 3.8 kilos WFE in the quarter. Consequently very high live weight cost. In the following 45 days after the second quarter, we harvested the remaining 2,400 tons of the biomass at last Fjord, Renihue Fjord. As you know, after the Renihue Fjord, we have another bloom in the Comau Fjord with direct financial impact in the first half of this year. In addition to that, this bloom will impact exchange cost when the remaining fish are harvested, with higher cost and lower volume in the last quarter of this year and early next year. In general terms, we expect a gradual improvement in the current cost in late third quarter and fourth quarter of this year and a complete normalization in 2022. The finished product cost that is the farming plus processing; in the second quarter, the lower harvest biomass translates into lower volume processed at the plant, present the processing cost. Consequently, the total cost of the product reached to $6.73 per kilo WFE, well above our goals. Processing volume in the second quarter was as low as [ 2,000 tons ] per month. That is more or less, less compared with our -- rest of half of our installed capacity. The lower average weight also contributed to the higher than normal costs. Finally, a larger fraction of the production with value-added products also implied higher costs, although this was a desirable outcome, given our value-added product strategy with higher margins. We expect an improvement of the processing cost in the second half of this year as harvest biomass and weight improved. We are expecting an average weight of 4.7 kilos WFE for the second half. Atlantic volume estimates. The low harvest biomass in the first half of this year will be followed by an important increase in the second half, which will be around 65% of the total harvest of the year. For the full year 2021, we expect to harvest around 41,000 tons of Atlantic salmon with harvest weight well above $4.7 kilo WFE. Adding the Coho in the last quarter, which will be around, in total, 43,000 tons. This is more or less 20% lower than anticipated a year ago as a consequence of the incidence in the mentioned fjords, Comau and Renihue. In relation to the stocking plan, Salmones Camanchaca stocking plan is in line with our original plan, while industry stocking for Atlantic is up 18% compared with 2020. In that year, a significant number of stocking were delayed to the second half in part because of [indiscernible]. Coho stocking in the industry is 5% up compared with the previous year. Atlantic salmon biology, as you can see in the graph, we have a significant increase of the mortality in both the all biomass mortality, the dark blue line and also in the closed site mortality in the second quarter compared with the previous quarters. All biomass mortality in the second quarter includes the Comau Fjord algae incidents, representing 80% of the total mortality, which was financially recorded in the first quarter. It was a provision in the first quarter. Closed site mortality includes one site from Renihue with high mortality due to the algae impact. The other 2 were closed in the third quarter. So this indicator will be high during that quarter. In relation to the biology indicators the low yield and the low average weight due to the effect of one site of the Renihue Fjord. For the survival in biomass in the Renihue Fjord, the feed conversion biological feed conversion ratio had a good performance on closed sites. Let's go to markets. Okay. First, the spot price evolution. Prices, as you can see in the graph have been very volatile during the last 12 months but are now well above the pre-pandemic level and also at historical records. This is a consequence of stable and higher retail consumption and about reopening of foodservice. Salmon consumption has reached the home table and will remain there. We have also a significant reduction in the Chilean supply in the second quarter of this year. And so will happen in the third and fourth quarters, supporting, in our view, the current price levels. Salmon has increased in general, the share of consumptions and itself with groceries as people are searching for healthier food. Salmones Camanchaca price achievement; that is the return on raw material. Salmones Camanchaca continues to show more stable prices as we leverage our value-added strategy in key markets and long-lasting agreements with key accounts. We have 90% of our production and sales in value-added products. This stability reduced volatility as we have demonstrated in the past, although it naturally means slower price recovery when prices increased significantly in a shorter period. That is the case of the second quarter. This kind of value-added agreement were highly positive in the second half of 2020, and we believe it will be so by the end of this year. However, in the second quarter, it has meant lagging market price increases and lower price realization. The price achievement was also impacted by the larger proportion of non-premium product as a consequence of the raw material quality from the sharpest site from the Renihue Fjord. We will gradually capture the full price increase during the second half of this year. Okay, market allocations and product distribution. On market allocations, the North American market remains the largest, but some reallocation was made to favor LatAm, Latin America and also Mexico in particular. So in the U.S. market in the second quarter, closed to the historical level between 40% to 45% market share down from 51% in the second quarter of 2020. But our strategy in Central America performed very well, increasing from 12% to 22% in Mexico, now boosted by our new local marketing and distribution organization. And third, the value-added product strategy reached 89% of the mix with portions accounting for almost half of the sales. We have become a portion specialist and expert. Also, we have an important reduction in the inventory level, as Ricardo mentioned, in the first half, realized at much higher prices than where they were last year. Russia is back into our portfolio of markets, and we expect the first sales till September this year. Finally, the Atlantic Industry Projections, in 2020, Chile harvested 790,000 tons of Atlantic, but has been declining from the second quarter of 2021. Estimated decline for '21 is in the range of 15% to 20% according to various sources, including our own projects. At the end, 2021, industry volume will be similar to '17 to '18, much stronger with higher demand.

[Ricardo Garcia Holtz, executive]

Thank you, Manuel, for the description of the quarter operationally. And from a marketing point of view, let me get into a brief comment on the financials of the second quarter, and I will try to go quickly to the last part, which I think is the most strategic observations. As you all know, the second quarter were -- have important direct impact from the blooms of the Renihue and the Comau fjords. The Renihue and Comau has a direct impact of about $15 million, [ $14 and something million ] during the quarter of -- during the semester, of which about $3 million were on the quarter. That was the direct impact, meaning the extraordinary mortality, the mortality that is not covered by insurance, the direct expenses of the mitigating and remediation measures taking for the mortality, the move of fish from 1 site to another to protect it and so on. There was a lot of expenses there that are part of the EBIT in this quarter and the cost of product. The cost of the Renihue on the other side, more than directly into the P&L, went into the cost of the fish, something that Manuel mentioned. That -- we have 2 elements here, which are important. The direct impact of mortality and expenses of the event, particularly the Comau during this first half. And what I would say, the indirect cost of higher cost of the fish and therefore, the harvested fish to be saved -- to be sold afterward. So these are the 2 implications for the quarter and explain the negative deviation of the EBIT compared to the second quarter of 2020. The Coho on the other hand contributed positively. As we mentioned, we have a very important price improvement in the Coho, and we will have a much cost basis for Coho in the harvest in this coming month. So we envisioned good margin for that business line that we have entered. If we get into the P&L, something that is not covered fully by the EBITDA comment that we have already made. I think that is worth mentioning again, the first value, the fair value, very negative last year, positive this year, reflects the condition in the marketplace, where the prices were declining last year and increasing substantially during 2021. And that is very favorable and favorable also for the profit to a point where the loss of the second quarter of 2020 was cut by half in 2021. I think that there isn't much on the P&L to add other than the operational review that Manuel already gave. So let's go into the cash flow. Cash flow was negative for the quarter, I would say, marginally at less than $3 million as a consequence of a negative operational cash flow, for which the company added $5 million on financial debt to fund this. Important to mention that the liquidity position of the company was what I consider strong at $23 million at the end of June. And in reference with the financial position, the next slide, I think that in the context of the last 15 months, with 3 very large incidents. One, I would say, a market incident caused by the pandemic that generated losses last year and has also implication for 2021 as the pandemic were still around during the first half of 2021. That is a very important and significant unfavorable impact for the company as well as the 2 algae blooms that we have already mentioned. In that context, I think that the financial position of Salmones Camanchaca is very strong, was very strong before that. Because of that, we have kept the liquidity and the strength of the balance sheet at a good level in the context, obviously, that we have faced during the last 15 years. We have the equity ratio above the covenant level. And on the EBITDA, obviously, with a negative EBITDA, we bridge that, but we have already obtained the full support of the lenders and the bankers that are supporting Salmones Camanchaca [ Suta ] without inhibition challenges on that side. And the financial debt of the company is about $40 million above what it was last year as a consequence of these incidents. In a company, that was very much able to absorb more debt even its capacity and its ability to generate an EBITDA in the coming quarters and years. With that, let me go into the summary, which I think is the most important part of this earnings report because the company has reflected, and the company has -- think about what has happened during the last, I would say, 15 months, maybe 18 months. And the conclusion is that it would be, I would say, unrealistic; it would be unprudent, unwise, not to review our growth plan that we envisioned 2 or 3 years ago that we're aiming to get to the full capacity of the company.

And by that, I mean the capacity at the sea site, at the ocean site, at the primary plant and the secondary plant, the marketing ability that the company has, the hatcheries that we had. Everything is built up, including the tunnels of Salmones Camanchaca to reach that 70,000 metric tons. However, obviously, in the context that we have faced during the last 15 months, it would be -- it would not be wise to keep a blind on that. And we have made some revision of that, as you can see.

Obviously, in 2021, there is an important reduction in the harvest for the year as you can see in the graph, almost 20% below what we are -- we were aiming a year ago, and that is a direct consequence of the lower biomass that we have in the ocean today because of the algae bloom as well as its consequences in 2022 because some of the Comau fjord harvest were coming in 2022, early 2022. So there is also some impact on the guidance for 2022, and that's why we have revised that to slightly lower than 50,000 metric tons of Atlantic next year, the year 2022. However, we will likely double the production of Coho. So all in, we will be about 50,000 to 53,000 metric tons in 2022, slightly below 2020 harvest and certainly below 2019. The long-term growth plan of the company is intact at around 70,000 metric tons, as you can see in this graph. But the company have concluded that is wise to delay 1 or 2 years, the 70,000 metric ton goal. We were aiming to do that in '23, '24. That was the original plan 1 or 2 years ago. And now we are envisioning that, that will happen in the year '24, '25. So long term, nothing has changed. In the short term, we have prudently and wisely postponed 1 or 2 years the growth plan that we have. Now that is half of the answer. The other half of the answer is the company has confronted new challenges that we did not envision when we made the IPO in 2018. And we, with a little bit of realization and prudency, need to assess what are the risks that we are facing today and how are the company adjusting, and I would say, adapting to these risks so that to ensure that the growth plan that we have that has not changed, maybe postponed 1 or 2 years, continues to be as profitable as we were aiming to have 2 or 3 years ago. So let me get into that, and I will be very high level at this point. The answer is a combination and a refinement of the existing strategies of the company. Lots of measures taken at the end of the day to reduce -- to mitigate the risk, reduce the probability of those risks and also reduce the impact of those potential incidents that the company might face. What are the key elements? And I would say there are 3 main strategic elements on this. First, on the market risks and we faced during 2020 very large market risk because of the pandemic, collapsing the foodservice segment and therefore, collapsing the price. How are we envisioning and raising that risk in the future to keep the profitability? And that is mainly by our value-added product. And Manuel has rightly pointed to the fact that during 2021 and particularly the second quarter of 2021, almost 90% of the production of the company was value-added product, and we have probably become an expert and a specialist, for example, on the portion. Lots of value-added going to the key markets, [ spreading ] accounts and getting agreement with key accounts that give us the stability on the price. That is number one. To confront the oceanographic risks that might embed a certain impact of what is called climate change. I am not certainly on the fact that we are facing a climate change in the south part of the Chile, but there is a risk. Evidently, there is a risk. There is a lot of talking about it. And the question is how the company adapt to that and prepare to confront those risks. And I think that, that is a combination of 2 strikes. On the one hand, we will be reducing the stockings in the fjords of the 10th region, where we are envisioning a higher risk than before because of deficiencies in oxygen and because of the presence of algaes. We are extracting Atlantic stocking from the fjords of the 10th region, moving those stocking to companies available farming sites in the 11th region, in the region of [ Pto Cisnes ], where we have seen a much better behavior vis-a-vis these incidents, and that will happen in the coming cycle. To give you an example, during the 2021 year, we have formed 7 sea sites in the 2 fjords of the 10th region, Comau and the Renihue. And then, our new plant for the next cycle in that territory, we are planning to stock only 3 sites in that. So reducing the exposure to the fjords. And similarly, we are going to move those stocking to the 11th region or at least partially to the 11th region on farming sites that we already have or are receiving back from lease contracts, completing their term in the coming year or so. That is one strategy. The second strategy that we have been sort of exploring quite successfully the farming of the Pacific salmon. Pacific salmon has 3 characteristics that I think is worth mentioning. First, it is harvested before summer season, and therefore, substantially reducing the risks associated with efficiencies in oxygen and the presence of algae bloom. That's one. The second is that it consumes no antibiotic and therefore, excellent for niche markets in several countries. And the third, it does not use antiparasite, all of which help ASC certification, penetration of high-value niche segments in the main market. So we are planning to stock more Coho, probably as much as twice more in the coming 2 years and particularly in those fjords of the 10th region. That helps us exploring and utilizing fully the capacity of the company that both have in the farming side, in the hatchery as well as the processing, and there is an entire strategy that not only takes into account the farming, but also the processing and very importantly, also the marketing side of the Coho, where we are planning to keep the VAP or the value-added product strategy. Just to give you an example, Manuel, I think that more than 2/3 of the production of Coho so far has been value-added, and we are planning to increase that in the years to come. So I think that these are the main strategy and something that is, obviously, we are implementing and adapting all of the new technologies, all of the new practices, farming practices that are coming to the market to mitigate those risks, including, for example, the use of state-of-the-art very large wellboat that will allow us to move fish from one site to another site in case of a danger with very large capacity to move quickly. Also bubble curtains, oxygens plant and various measures, including intelligence -- artificial intelligence to better assess the risk and confront with these incidents that might have. So better prepared for the future. I think that's important to mention. So in summary and to complete this presentation, what can I say? I mean, it was an awful quarter. It was certainly an awful quarter. I cannot think otherwise. However, since we have eyes in front and not eyes in the back, we need to move forward. And going forward, there are very positive trend. Most important of which the world is embracing salmon very robustly. And we have seen a very important demand. Not only people continue to buy a lot of salmon at the retail sector, but the foodservice is booming, and there is a lot of increase in the market share of salmon within seafood category and seafood within grocery category. And that is a very positive news for all seafood companies. That is very important. The poor performance that we have in the fjords, it was very sad, but we are taking measures so that in the next cycle, the risks will be substantially lower than we have embraced in 2021. The Coho production and performance were very positive. We are doubling production next year and increasing that in the coming years. We are very enthusiastic about the acceptance of the Coho in the market, particularly with value-add. It's a lovely product. Prices are trending up very robustly. The Chilean supply is diminished. It will be between 15% and 20% lower this year compared to the previous year. I think that there are limitations for growth in the future. So I think that the supply side will help and the demand, as I said, is very robust. So price context, we envision to be favorable for the coming quarters and years. And finishing, we are very proud to have taken all necessary measures during this pandemic context to protect our employees and workers to a point where in Salmones Camanchaca, we have no fatalities. No one has severely been affected by COVID. We have kept fully operational all the assets of the company, not only on the farming, but also on the processing and logistics, which, as you all know, has become very challenging now. We have almost 80% of the people fully vaccinated. That's very high. So I think that we have managed well this very challenging pandemic condition. Finally, our long-term goal of 70,000 metric ton is intact, and we have taken and will be taking further measures to ensure that in the future, the goal plan that we had 70,000 metric ton is achieved with lower risks that we are facing. However, as I mentioned, prudently and wisely, we have postponed that 70,000 1 or 2 years. So I think that by the mid of this decade, we'll be getting there. With that, thank you very much. And I don't know, Daniel, if there is any question from the audience.

[Daniel Ventura, executive]

Yes, we have some questions. The first one is from Heidi from Pareto. Sorry, from Alex Aukner from DNB. Chilean industry, a small release has increased materially over the last month. Could you comment on the expected industry harvest growth in 2022 and 2023?

[Ricardo Garcia Holtz, executive]

Well, I think that the -- part of the answer to that was given by Manuel. When the pandemic started late March 2020 and severely confined Chilean people during the second quarter of 2020, there was substantial delay in the stocking plan in those, I would say, 3, 4, 6 months. And therefore, there was some postponement of stocking for the last part of 2020. Therefore, when you compare the first 6 or maybe 7 months of 2021 with a lower number, artificially lower, if you want, in 2020, you have such a large increase as 18%. I think that, that will -- we will reduce in the year. And Manuel, could you comment on harvest because I think that, that was the question for 2020 in the Chilean industry -- 2022, sorry?

[Manuel Arriagada Ossa, executive]

Yes. As Ricardo mentioned, analyzing the stocking for the Chilean industry, we expect in 2022 an increase compared to 2021 of about 10% in the total harvest, so it's not a major change. You will see that the previous 2020 total volume of harvest is our best estimation, around 10%.

[Ricardo Garcia Holtz, executive]

So 10% in the context of a 15% to 20% decline in 2021 means that 2022 will be lower than 2020, essentially. Now next question is the margin increase for profit? As mentioned, the Coho best performance, best margin performance this year is mainly a consequence of the price, the best price for the Coho and the fact that we have gone into a lot of value-added for Coho, in our markets, not in the traditional market for Coho. Now going forward, what I also said that not only the price looks very favorable going forward. But remember that in 2021, Coho harvest, which will happen starting next month and for about 2 or 3 months, next harvest is coming harvest, will come at a cost of about $1 lower than the previous cycle because we now enter into 2021 with much better density condition for the Coho stocking. And therefore, there is a cost advantage in 2021. That will be reflected most likely at the end of 2021, early 2022, when we sell these coming harvests.

[Daniel Ventura, executive]

Next one is from Carl-Emil, Pareto. Do you expect to get down to the same cost level as in 2019, 2020 by fourth quarter 2021?

[Ricardo Garcia Holtz, executive]

I will be very honest with you, Carl-Emil, and the question -- the answer is no. I think that not this year, and the reason for that is because some of the Comau impact, as I mentioned, was direct. And the direct impact of the Comau, meaning the mortality and the expenses of dealing with the mortality is already being registered in the earnings report and in the balance sheet. So we take care of that, its history. However, the indirect or the other economic impact of the event will be expressed in the numbers when we harvest the remaining fish. And we have, Manuel, about 1.5 million fish still in the water in the Comau fjord that will be harvested, I would say, at the end of the third quarter. And during the second -- sorry, during the fourth quarter of 2021 and early 2022. And those fish are coming with more costs than normal. So I don't think that in 2020, it will be much better cost than the first half, certainly. But I don't think that we will regain to the previous cost of, let's say, [ 3 something ] lightweight.

[Daniel Ventura, executive]

Next question. I'm sorry.

[Ricardo Garcia Holtz, executive]

Now 2022 looks a lot better.

[Daniel Ventura, executive]

Next question is from [ Andres Navarrete ]. Thinking about the long-term growth, how much of the change of the use of 10th region sites to the 11th regions is influenced by regulatory issues because of the high mortality of Renihue and Comau sites?

[Ricardo Garcia Holtz, executive]

Not, Andres. I think that the answer to that is negligible. There is no regulatory umbrella in the decision of moving from the 10th region to the 11th region, the Atlantic stocking plant. To give you a number, it's important to have this in mind. The industry and we think about the totality of the production of the 10th and 11th region, forget about the 12th where we are not there. If you take about the 10th and 11th region, the industry -- the Chilean industry harvest around 2/3 from the 11th region and 1/3 in the 10th region. That is the Chilean industry. During the last 4 years, prior to the pandemic year, or prior to this bloom, Camanchaca was on the sort of other side of the street. We were producing 60% in the 10th region, Atlantic and 40% on the 11th region. What we are doing going forward is to switch that, and we will be producing about 40% of our Atlantic production from the 10th region and about 60% in the 11th region. So I would say, closer to the industry allocation between 10th and 11th region. Now that does not mean that we will leave the 10th region underutilized. And that is precisely where the piece of the Pacific salmon come into place to utilize the good sites that we have in the fjords of the 10th region.

[Daniel Ventura, executive]

Next question is from [ Ignacio Silva ]. How is logistic challenges due to the COVID and particularly higher freight rates impact cost and margins?

[Ricardo Garcia Holtz, executive]

Very good question. I don't think that there is any company today that trades internationally, that has not been asked about these questions, and I would divide them into the air freight and the maritime transportation. On the air freight, we have a jump in the cost during 2020 because of the airline situation. That has gradually normalized, not fully. But as you know, market is the market. Then when there is scarcity in one side and the prices go up, there is a lot of people inventing and embracing new ventures and more supply came into the market. And I would say that today, we are, Manuel, maybe 10% above our air freight cost from the pre-pandemic level, which I would say, it's not significant, more expensive obviously, but not significant. And there is availability of that. Cargo and passenger airlines are catching up quickly. That's one thing. On the maritime transportation, you all know the problem that the world is facing. Essentially, the U.S. and Europe is consuming a lot of products from Asia, particularly from China. And therefore, western developed world need a lot of containers to transport the products that they want to import from China and Asia in general. And therefore, every container is going into China to a point where sometimes you have empty containers going to China, so that they are quickly into China and be shipped to the U.S., leaving the rest of the world with a deficit of container. That's one part. The second part, there is a lot of COVID measures in the ports that have slower the effectiveness and efficiencies of ports. And what used to be, let's say, 60%, 65% utilization of the port, today has dropped to maybe 40% to 45% utilization of the capacity of the port, potential capacity. That has also slowed the process. So we are confronting a deficit of container. And the other side of that coin is that the cost of the container today in certain industries and in certain products, it's 5x, 7x more expensive than it would -- it used to be, something that costs $2,000 to $3,000 2 years ago. Today, it could cost you between $10,000 and $12,000 container. So that's a reality. Fortunately, Salmones Camanchaca had a very good contract closed several months ago, where our rates are higher, but not significantly. And the challenge today is to have the containers. So far, up to today, we have faced no issue on maintain transportation. And we expect this situation to get normalized somewhere in 2022, but I am not the most expert on that particular industry.

[Daniel Ventura, executive]

Next one is how much of the better price obtained in Coho is because of spot sales or niche market reached?

[Ricardo Garcia Holtz, executive]

I would say it's a combination, both are affecting. I cannot give you exactly the attribution analysis of the higher price, meaning how much is from the market increase in price of the Coho and how much is on the better margin that we get from the value-added product. Manuel, do you have a word on that? I don't.

[Manuel Arriagada Ossa, executive]

Yes, only a few words, of course is a combination of effects as Ricardo mentioned. But just to give you some numbers of the first half in Coho, we sold around $90 million, and about 40% of that was sold to the Japanese market, that is the traditional market without -- only 40%. So the remaining was the niche market; in the American market, Europe and Southeast East Asia and also Latin America, especially Mexico. So it's a combination, 40% in Japan of an absolute increase in the prices and the remaining 60% in the other, let's say, niche value-added markets.

[Ricardo Garcia Holtz, executive]

Okay. Two questions related to marketing. Price achievement was well below Urner Barry during the first half of 2021. Do you expect the second half to be more in line with the Urner Barry reference? The -- let me repeat the strategy of the company. The strategy of the company is value-added product. We are avoiding the commodity. The commodity is the one that is in the Urner Barry or the reference price or the benchmark price. And that has a lot of volatility. And it explains a rather small fraction of the total market. I don't think that Urner Barry explained more than 10% to up to maybe 15% of the total market. There is a vast trade outside of the Urner Barry. Historically, we have been $0.40 even $0.50 above $0.5 between, I would say, $0.35 and $0.5 above Urner Barry, when things are normal or on average. Now that means that when the Urner Barry goes up very quickly, our agreements lag us that increase, and we take some month to get the new price. But the opposite is also true. If you take a look at what happened in the second half of 2020, where we were well above Urner Barry because Urner Barry was collapsing and we have our agreements. So at the end of the day, it's about volatility. And our price and our strategy is to have less volatility, and therefore, a more stable EBIT on the year. Now certainly, the differentials between our price and the Urner Barry will be much smaller in the second half of 2022, provided the Urner Barry doesn't sky rocketing up again because, obviously, then we will also be lagging. But if it gets some stability, then we will probably get into that and likely surpass that in the end of 2021. How much of the lagging price achievement in this quarter could be attributed to contract position vis-a-vis the lower volume? I would say that the lower volume is more important. I mean, think about -- we harvested this year less than 7,000 metric tons of Atlantic, which is half of the capacity or even less than half of the capacity. So our ability to capture the much higher price of the spot market was very reduced because we didn't have fish. And we have to fulfill the agreements that we had. So I think that is much more important, the lower volume than the price -- the agreements. The agreements typically goes on the value-added product, something between, I would say, 4 months to maybe 9 months that, that's more or less the range. So it's not long term.

[Daniel Ventura, executive]

Next one is what should we expect in terms of CapEx from '22, '23, given the delay in the growth plan?

[Ricardo Garcia Holtz, executive]

It will be obviously adjusted because of that, obviously, but it will come with investments precisely on the new tools, new technology, new equipment that we mentioned that will protect and reduce the risks that we are facing going forward. So the exact number for 2022 will be revealing that in the coming quarters so that kept following us. But in 2021, there was -- in 2020 and 2021, there has been a substantial reduction on investment plan, precisely because the context that we are confronting.

[Daniel Ventura, executive]

How should we think EBIT per kilo going forward with the larger proportion of Coho in the mix? How much lower is the return of Pacific versus Atlantic in your projections?

[Ricardo Garcia Holtz, executive]

We think that in our strategy, long term, there should be -- there should not be a negative difference on the Coho versus the Atlantic. And that is precisely why we have been professionally exploring this new specie for Salmones Camanchaca during the last 3 years at a level where we can refine and fine-tune the strategy, both at farming, at processing and at marketing so that Coho became as profitable as the Atlantic. Now there are challenges of, obviously, it's not a simple thing. As you know, the Coho is harvested in about 3, 4 months. So you need to have a lot of processing capacity. And if you need to sell that immediately, then you only have to go to the main market of Japan, and then the market condition becomes a little bit unfavorable. So it requires talent, it requires intelligence, presence in the market, and that is precisely what Salmones Camanchaca has.

[Daniel Ventura, executive]

No more question.

[Ricardo Garcia Holtz, executive]

Okay. Thank you very much for your attention. Again, I could not paint rosy this last quarter because it was not. But I think there are several elements both in the marketplace and both in Salmones Camanchaca that give us a bright future in the coming years. Thank you very much.