| SOFIKO, Greece
SOFIKO, Greece Dec 16 Greek fish farmer John
Stephanis has a problem. Global demand for his sea bass and
bream is strong. But his company Selonda Aquaculture SA
is so strapped for cash that it cannot expand its
farms. One solution, says Stephanis, is smaller fish.
By growing slimmer fish - to about 370 grams from the
current average of 400 - Stephanis can grow more of them in each
of his 50 farms. And by keeping prices unchanged, he can start
paring his losses.
"We've managed to put our fish on shelves around the world,"
said Stephanis, a former advertising executive who founded
Selonda in 1981. "Ours is a national industry".
Leaner fish is just one way in which Selonda, like other
Greece aquaculture firms, is trying to resurrect itself from a
fall in fortune that has mirrored that of the broader Greek
economy. Once the "El Dorado" of the country's industry - Greece
farms about half the global output of sea bass and bream -
aquaculture companies are now unravelling under the weight of
cheap credit they piled on during two decades of booming growth
in the 80s and 90s.
One of Greece's four major firms filed for bankruptcy in
September while others are in talks with Greek banks -
themselves propped up by bailout funds provided by the European
Union and International Monetary Fund - to restructure their
debt. The U.N.'s Food and Agriculture Organization predicts that
Greece will lose its position as the biggest producer of
Mediterranean fish to Turkey, after a 7 percent fall in
production expected this year.
The future of Greece's aquaculture industry is important for
the country as a whole, as it tries to claw back years of lost
competitiveness. Six years of deep recession have shrunk the
economy by a quarter and shut thousands of businesses and fish
farming is seen as one of the few sectors that could help pull
Greece out of the quagmire - if it sorts itself out first.
Fish, mainly sea bass and sea bream, was Greece's
second-biggest agricultural export last year, beating even its
famed olive oil. The sector currently employs about 20,000
people, and is one of the few industries - alongside tourism -
that has enjoyed strong demand, especially by international
In a 2012 report, McKinsey & Company identified Greece's
aquaculture sector as the rising star of the economy, saying it
could contribute to growth over the next five to 10 years - if
companies managed to improve their business models.
"The sector is close to sinking," Ilias Baras, Selonda's
business development manager, said on a boat ride through the
farm in Sofiko in the Peloponnese region, drawing parallels to
"The only difference is that Greece was not allowed to
collapse. If these businesses fail, this land has nothing to
hope for," Baras said, as men in bright orange suits worked
through heavy rain to keep up with orders pouring in from as far
away as Australia.
FROM TINY ISLETS TO SINGAPORE
The mood was not always this glum among Greece's fish
farmers, who set up their firms in the 80s when growing fish in
cages was an alien concept to a nation with a long history of
fishing and used to eating fresh-caught fish from the sea.
Sea bass, in particular, has long been popular and known as
difficult to catch - the Greek expression "I caught a sea bass"
is used to refer to great and unexpected success. Soon enough,
round floating cages began popping up all over Greece's vast
Thanks to generous private and European investment and easy
access to credit, fish farms developed even in tiny islets,
where there was not much other investment. The number of firms
grew from 10 in 1986 to 370 in 2008, government data shows.
For many firms including Selonda, which exports more than 80
percent of its output, the only way was up. In 1996 it sent
Greek managers to work a fish farm in Kuwait that was destroyed
during the Gulf War, and later built facilities for tropical
fish, all set with Greek nets and cages, in Singapore.
"The 90s was a remarkable decade," Stephanis said from his
office at the foothills of the Athens Acropolis, decked with his
collection of Greek antiquities, including a fishhook that
inspired the company's logo. "It was an El Dorado."
At its height, Selonda managed to convince the country's
stock market regulator to allow it to enter the stock exchange
in 1994 - the first fish farming company worldwide to do so - a
remarkable feat for a relative newcomer in a global industry led
by companies in northern European countries such as Norway.
Today, Selonda's 50 or so farms produce up to 20,000 tonnes
of sea bass and bream a year, compared to just 20 tonnes when it
began. It exports to countries including Spain, Italy, France
and the United States.
For many years, fish farm companies borrowed easily, either
to set up their businesses, upgrade facilities or expand. Banks
gave out loans without asking many questions.
But prices fell sharply in 2000, revealing that the firms
lacked proper hedging strategies and were unable to deal with a
lengthy production cycle and sizeable operating capital for
food, nets, cages and other running costs.
Each time prices jumped, farmers grew more fish. But by the
time they reached the market two years later, the suppliers
often faced a glut of products and prices fell, forcing many to
sell at a loss.
By the early 2000s fish farms were still borrowing - but
this time it was to plug holes in their balance sheets rather
than invest. The result was that in 2008, when Greece slipped
deeper into economic crisis and prices fell sharply again,
Selonda, was selling fish at 3.90 euros per kilo though it cost
about 4 to 4.5 euros to produce. Since 2008, prices have ranged
between 4 and 5 euros, leaving little profit margin.
These days, even though demand continues to rise, the 10
biggest firms owe Greece's squeezed banks over half a billion
euros - more than their combined sales. Selonda alone owes 185
million euros and its equity was wiped out in the first half of
this year. It reported sales of 133 million euros in 2012. The
company trades at 10 euro cents a share, down from its peak in
1999 of 24 euros a share.
WANTED: A MAGIC SOLUTION
For Stephanis, the industry is too precious to let it fail,
and a debt restructuring - with banks turning part of the debt
into equity and extending maturities and lowering rates on the
rest - is urgently needed. The companies have pledged shares as
collateral for their bank loans and at Selonda, this collateral
amounts to 21 percent of its share capital.
A senior Greek banker who declined to be named acknowledged
that fish farming was overborrowed and that Greek banks were
"not negative" to the idea of restructuring their loans.
But Greek banks themselves are in a tight spot. Hammered by
the recession, the four major lenders had billions pumped into
them to prop them up after a sovereign debt restructuring last
year and rising bad loans.
In the meantime, fish farms are working hard to improve
Selonda is exploring ways to shorten the farming process
from the roughly 24 months it now takes to 18 months, as a way
to get the fish to market more quickly, and part of that will
come from growing the fish to smaller weights, Stephanis said.
Fish farming companies that have spent the last three
decades competing against each other are also looking to
consolidate among themselves to weather the storm.
Selonda agreed to merge with rival Dias, but put the deal on
hold after Dias filed for bankruptcy protection in
October, Stephanis said. It has also approached rival Nireus
for a possible merger, an offer Nireus is weighing.
Once arch-rivals, fish farmers were now left with no choice
but to join forces, Stephanis said. "We have to agree - it is
imperative," he said.
At the farm in Sofiko, where truckloads of fish are ready
for the packing factory and then markets around the world,
questions remain about how an industry that could have been
Greece's pride has become a symbol of all that has gone awry.
While the similarities with Greece's own downfall are easy
to spot, a way out is harder to identify, Baras, the business
development manager, said. "The truth is, a magic solution is
still being sought".