Higher sales, but lower profits for Iceland Seafood in Q1

The high inflation and high input cost - especially salmon - negatively impacted Iceland Seafood International at the start of the year.
Working inside the factory at IS Ibérica's processing plant in Barcelona, Spain. Photo: Iceland Seafood International.
Working inside the factory at IS Ibérica's processing plant in Barcelona, Spain. Photo: Iceland Seafood International.

In Q1 2023, Iceland Seafood International (ISI) had sales of EUR 123.1 million, 23% higher than in the same period last year, however, this was not reflected in lower profits. Its normalized profit before tax (PBT) in Q1 was EUR 1 million, down from EUR 2.6 million in Q1 2022. High inflation and high input costs were to blame. "Especially the price of salmon was impacting our operations negatively in Ireland and Spain", said CEO Bjarni Ármannsson, who was nevertheless optimistic, "We do expect this to normalise throughout the year".

Affected by high salmon prices

ISI's net loss for the first quarter was EUR 2.2 million, which is EUR 1.4 million more than in Q1 of the previous year when the loss was EUR 0.8 million. The start of 2023 continues the tone set in 2022, a year that Ármannsson described as "a challenging year in every sense of the word", after it was reported that the group posted a net loss of EUR 9.9 million, despite an 11% increase in sales.

As said, at the start of 2023 buoyant sales were not enough to defend Iceland Seafood against inflation and increased costs in the prices of raw materials. The sharp increase in salmon prices severely affected the profitability of both Ahumados Domínguez in Spain and Oceanpath in Ireland.

Southern Europe Division

Sales of the Value Added Southern Europe Division were EUR 66 million in Q1, 22% higher than last year. Strong sales of cod products and Argentinean shrimp in the weeks leading up to Easter made March a record sales month for IS Ibérica. However, even though Argentinean shrimp production volume in the period was approximately 70% higher than in the same period of 2022, challenging market situations and decreases in selling prices negatively affected margins.

In the specific case of Ahumados Domínguez, the company is already taking steps to further integrate the operation with IS Ibérica, which will reduce costs and improve efficiency. Iceland Seafood incorporated the Spanish company in 2021 with the aim of strengthening its position in the retail market and creating a platform for the sale of high-quality products from Iceland under a strong consumer brand.

Northern Europe Division

Regarding the Value Added Northern Europe Division, as with Ahumados Dominguez in Spain, strong increases in salmon prices negatively affected sales volume in the quarter for the Oceanpath Group, ISI's operation in Ireland. However, the impact of the lower volume was partly offset by a slight growth in sales in euro terms. The loss before tax in Q1 2023 was EUR 0.2 million, half of last year's EUR 0.4 million.

Meanwhile, although after canceling negotiations with an anonymous buyer, Iceland Seafood announced that it would not be selling its United Kingdom operation for the time being, IS UK remains classified as an asset held for sale. "Our UK operation also continues to impact our income statement negatively, in line with our budget for Q1", said CEO Bjarni Ármannsson. "This negative development continues into Q2 and Q3, with our EBIT breakeven now expected to be reached in Q4".

Better operating environment on the horizon

Based on Q1 results and current trading, Iceland Seafood International has decided to revise the normalized PBT outlook range for 2023 downwards from the previous range of EUR 10-14 million to EUR 7.5-11.5 million. Still, despite the difficulties, the Icelandic company thinks that the outlook for the rest of the year is good. In addition to the Sales and Distribution Division's excellent start to 2023, with sales and profitability up on the previous year, ISI expects salmon prices to fall and stabilize.

Taking stock of the quarter, Bjarni Ármannsson, CEO of Iceland Seafood International, acknowledged that the losses recorded at the bottom line level in the quarter are starting to hurt its balance sheet. However, he remained positive. "We believe we see a better operating environment on the horizon and are optimistic as we draw further into the year. This has been an unusually prolonged period with headwinds", he concluded.

About Iceland Seafood International

Iceland Seafood International is one of the largest exporters of fish products from Iceland. The company is an industry-leading supplier of North Atlantic seafood and a leading service provider in its markets, moreover a key processor of high-quality seafood in the Spanish and UK markets. A team of over 620 people work in the Group.

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