Iceland Seafood International (ISI) announced that it has agreed to sell its UK operation to Danish value-added producer Espersen. The buyer, which has factory operations in Europe and Asia and a significant portion of its sales in the UK retail market, has completed its due diligence process and transaction documents are now being finalized. As reported by ISI, when the transaction is completed in September, Espersen will own 100% of the share capital of IS UK.
The news of the sale of the Iceland Seafood business in the UK has been made public coinciding with the presentation of Q2 results, which, according to the company, have been affected by the "volatility and unstable environment."
The announcement also shows that the loss from discontinued operations in the UK in the first half is EUR 13.9 million, including fixed asset impairments of EUR 8.3 million related to the divestment of the business. Therefore, most of the negative impact of the divestment is included in the 1H 2023 results.
At the end of 2022 Iceland Seafood International was seeking a buyer for its UK operation and in early December announced that it had signed a Letter of Intent ('LOI) "with a respected industry player." A week later, the company announced the cancelation of the negotiation, and, finally, in February this year, ISI said the proposals received did not reflect the value of the company, so it opted to keep its subsidiary in the UK.
However, just six months later, the company changed its mind. As mentioned, in statements following yesterday's Q2 results presentation, Bjarni Ármannsson, CEO of Iceland Seafood International, announced that the company has decided to divest the IS UK business after four difficult years and with what he described as "a substantial loss."
"We are confident that this is the right decision for Iceland Seafood as a business. This investment has been a great cost for the company and its shareholders. It's been a very tough market during these years, and we have tried with immense effort to turn this around without success," he said.
"I'm confident that the interests of our employees and customers are well served within Espersen AS and I wish Espersen all the best in this market. And I believe they can use the assets better than we have been able due to their strong position in the UK value-added seafood market," Ármannsson continued.
Regarding Q2 2023 results, the company said that volatility and unstable environment continued to affect its results, as has been the case since last year – that ISI CEO Bjarni Ármannsson described as "a challenging year in every sense of the word" -. However, Iceland Seafood believes that, while the price adjustments have a negative impact in the short term, they will create a basis for healthier demand in the long term.
"Q2 was another quarter impacted by high input costs, especially in salmon, but also continued lower prices of whitefish and shellfish," Ármannsson said. "Salmon has then also reduced in price – naturally, given the seasonality in production. All this amplifies the reduced demand at high prices amongst European consumers, who have been heavily impacted by worsened economic conditions, e.g. still relatively high inflation levels, volatile input factors and significantly higher financial costs. Again, as in Q1, our Argentinian operations didn't contribute much to our profitability. With adjustments in our inventories, we are loss-making and have reduced our outlook bracket for the year significantly," he added.
In the first six months of the year, ISI achieved EUR 222.3 million in sales, 7% more than in H1 2022, although its net margin was EUR 16.9 million, EUR 2.4 million lower. For its part, normalized profit before tax was negative by EUR 0.8 million, compared with EUR 3.4 million positive in the same period last year. Finally, the net loss for the first half of 2023 was EUR 15.3 million compared with a loss of EUR 2.9 million in H1 2022.
Still, the company is optimistic and says the outlook for the rest of the year is good, with salmon prices stabilizing and the start of Christmas production. "We believe we'll start to see an increase in demand during winter as prices have adjusted. We still have a positive attitude towards our Christmas season, our most important sales season. We believe our brands and position will deliver good margins and results, especially in Q4," Iceland Seafood International's CEO stated.
Founded in 1932, Iceland Seafood International is one of the largest exporters of fish products from Iceland. Headquartered in the island nation, it operates 3 divisions with businesses in Europe and North and South America. The company is an industry-leading supplier of North Atlantic seafood and a leading service provider in its markets. Its global network includes 12 businesses in 7 country locations.