Iceland Seafood International closes its annus horribilis

After low sales from April to September, demand partly recovered in the final part of the year, and the Group achieved a net profit of EUR 0.4 million in Q4 2023.
View of Barcelona ISI facility. After a challenging year, the overall positive performance in the Christmas season has enabled Iceland Seafood International to close in 2023 with a positive result in Q4.

View of Barcelona ISI facility. After a challenging year, the overall positive performance in the Christmas season has enabled Iceland Seafood International to close in 2023 with a positive result in Q4.

Photo: Iceland Seafood International.

"Last year was a challenging year for Iceland Seafood and its employees," said Ægir Páll Friðbertsson, CEO of Iceland Seafood International (ISI), at the start of his assessment of the company's 2023 results. Upon his arrival last September, Bjarni Ármannsson's replacement found a company in the red hoping for a Christmas comeback. Expectations were met, and what is described as an "overall positive performance in the important Christmas season" has brought ISI's annus horribilis to a close in the black, at least for the last quarter.

A step in the right direction

Iceland Seafood International closed 2021 with a 21% sales increase. In 2022, however, unprecedented cost increases and high volatility severely affected its operations, and the company reported a loss of EUR 9.9 million (USD 10.7 million). Then, in Q1 2023, although it had increased sales, it failed to reflect this in profits, and things did not improve from April to September, with large fluctuations in prices and uncertainty in the markets.

"This situation had a significant negative impact on the company's bottom line," stated ISI's CEO. "Interest rates and inflation were high in our main markets, which led to declining consumer purchasing power and higher logistic costs, mainly storage costs. High salmon prices in the first months of the year heavily affected the results for our companies in Ireland and Madrid. In the latter part of the year, the price of whitefish and shellfish decreased, which led to inventory write-offs and a lower sales margin."

"However, we saw notable improvements to market conditions in Q4, although they are still far away from recovering completely. I believe that these changes in the market conditions is a step in the right direction and that uncertainty will continue decrease in the latter part of 2024," Ægir Páll Friðbertsson added optimistically.

Iceland Seafood UK finally sold

As said above, after low sales in the April-September period, demand recovered somewhat in the fourth quarter. ISI Group sales in Q4 2023 were EUR 111.8 million (USD 121 million), 11% higher than in the same period of the previous year. For the full year, the result was a total of EUR 429.9 million (USD 465.5 million) in sales, 2% higher than in 2022.

On the earnings side, normalized profit before tax (PBT) for the full year was EUR 0.7 million (USD 0.75 million), compared to EUR 12.1 million (USD 13.1 million) in the previous year. For the fourth quarter, normalized PBT was EUR 2.6 million (USD 2.8 million), which is EUR 1.4 million (USD 1.5 million) less than in Q4 2022.

In addition, Iceland Seafood's results for the year were also influenced by the sale of Iceland Seafood UK (ISUK) which, after much back and forth during the year, was completed in September. The total negative impact of the transaction amounted to EUR 18.8 million (USD 20.3 million). Including this transaction and income tax, the resulting full-year loss for the Group was EUR 20.3 million (USD 21.9 million). Nevertheless, it generated a net profit of EUR 0.4 million (USD 0.43 million) in Q4 2023.

"The sale of ISUK was completed in the year. This activity has played the most significant role in the poor operating results in recent years, generating a higher cost of capital for the company, not to mention the time spent by management on this case," ISI's CEO said in this regard. "I firmly believe that after the sale of ISUK, our value-added companies in Spain and Ireland will remain strong and profitable in the future," he added.

Focus on improving the operation, capital structure, and strategy

Following the sale of ISUK, Iceland Seafood's VA N-Europe division consists solely of the Oceanpath Group's Irish business which, after a difficult start, performed well from the middle of the year. Demand over Christmas was strong, and profitability was in line with expectations. In addition, measures were taken in the fourth quarter to mitigate the potential impact of the salmon price increase in early 2024. Moreover, with investments planned for this year, the company is confident of further improving productivity.

The S-Europe division also reported good overall results in Q4, although demand remained lower than in a normal year. ISI is now focusing on streamlining operations and reducing costs. The merger of IS Ibérica and Elba was completed at the end of the year, and work is also underway to simplify and restructure Ahumados Domínguez, where a filleting and trimming line was installed in February. On the other hand, Achernar's operations in Argentina are being affected by the instability in the country following the presidential change in December.

For its part, the S&D division seems to be the only one to have escaped the annus horribilis. Although sales and profitability were down on the record year of 2022, 2023 was a good year for Iceland Seafood's Sales & Distribution, which performed well across all product categories, with pelagic sales especially standing out, 30% higher than in 2022.

As it is, CEO Ægir Páll Friðbertsson - who from March 2024 will also assume the role of MD of IS Iceland following the retirement of Bjarni Benediktsson - was optimistic about the future. "Iceland Seafood is a well-balanced company with a strong market position for seafood products in various markets and highly skilled, knowledgeable, and experienced employees," he said. "The focus in the short term will be to improve the operation of existing business units and the company's capital structure and review the company's strategy."

About Iceland Seafood International

Founded in 1932, 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. Headquartered in the island nation, it operates three divisions with businesses in Europe and North and South America. Its global network includes twelve businesses in seven country locations.

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