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Benchmark poised to leap ahead with rising seafood demand. AIM-listed Benchmark Hsolding spotted twenty years ago that aquaculture or fish farming was going to be big business, according to a recent  article in This Is Money.

Fish has overtaken beef on many Western menus both for dietary and taste reasons and demand is rising rapidly.

Malcolm Pye, chief executive, says that in 2000, when he formed the company, the direction the seafood sector was heading was clear. Since then, the company has made sure-footed progress.

Benchmark is now worth £310million but Pye sees no end in sight to the growth especially with demand for salmon, shrimp, sea bass and other species predicted to increase steadily for years.

The company is preparing for this, having just commissioned a new salmon breeding operation in Norway at Salten in a move that should mean another sizeable step forward.

Norway is the world’s largest salmon breeding region and the new facility is among the most modern anywhere.

The new plant will enable Benchmark to bring production in-house, both enhancing its profitability and enabling it to supply biosecure eggs all year-round.

Benchmark’s salmon breeding capacity, meanwhile, will rise by 75 per cent. This extra capability could not be coming at a better time, says Pye, as it has just about reached the limit of its existing facilities due to progress in recent years,

Underpinning his optimism are fundamentals that remain firmly in the company’s favour and though Benchmark is now eighteen years old the long-term story remains intact.

The fishing industry has just about reached the limit of what it can catch in the sea and might even be in decline.

Then there is the emergence of seafood as a component of heathy diets. A new wealthy, middle class has also started to flex its muscles in the southern hemisphere, which traditionally has been a fish-eating culture.

Overriding all of these, however, is the fact that to support a growing global population, more food needs to be produced. Currently just 2 per cent of the world’s food output comes from the water.

Pye believes Benchmark is ideally placed to take advantage of the spread of aquaculture to boost food production and meet changing tastes.

The business has three core divisions, breeding and genetics – which includes characteristics such as disease resistance, production efficiency and product quality.

Advanced nutrition specialises in feeding the young animals including probiotics to get through the early life stages. Animal health, meanwhile, tackles serious issues such as sea lice in fish farming.

Sea lice are one of the banes of industrialised salmon farms, but Benchmark now has products that effectively control the problem while also removing the medicine before it goes back into the sea.

Benchmark estimates the new product can generate sales of £45million once licensed. That compares with total group sales of £140million in the last full financial year, on which it made underlying profits of £15.7million.

There is the emergence of seafood as a component of heathy diets

In its latest half year, sales rose by 9 per cent to £76million and for the full year research house Equity Development expects turnover to climb to £162million. That’s before Salten kicks in, after which sales are expected to rise to £203million by 2020.

By that stage, Benchmark’s underlying earnings will be close to £27million with the bottom line also receiving a boost from the joint venture established earlier this year with Chilean salmon producer, AquaChile.

Chile is the second largest salmon producing country after Norway and AquaChile the world’s sixth largest producer.

Following the merger, Benchmark will be able to produce and sell Atlantic salmon eggs to AquaChile and into the Chilean market.

The two businesses will also work together on genetic developments for Atlantic salmon, coho salmon and rainbow trout. But there is more to Benchmark’s technology than just salmon.

Pye says it is better to regard its technology as an aquaculture platform that can be applied to many different species especially as genetic technology is common across species.

Salmon and shrimp account for the bulk of revenues currently, but Benchmark is starting to see good demand for sea bass in Europe, sea bream (dorado) and in the southern hemisphere, tilapia.

As these species become more popular the opportunities for Benchmark should grow in tandem.

‘We have all aspects of the aquaculture production cycle covered,’ says Pye.

Equity Development has a price target of 98.5p, which compares to a current market price of 54.5p.