ISI’s sales to Southern Europe offset challenging period for UK operations
Strong sales in Southern Europe and an improved performance by its Sales and Distribution division helped Reykjavik, Iceland-based ISI achieve higher total sales and profits in Q3 2021.
ISI achieved total sales of EUR 113.3 million (USD 128.5 million) in the third quarter of this year, up 16 percent over the corresponding period of 2020. The company’s normalized profit before tax for the period of EUR 3.4 million (USD 3.8 million) was EUR 3 million (USD 3.4 million) higher than in Q3 2020.
According to the group’s Q3 2021 results statement, its performance in the quarter showed “good recovery” against the same period last year. After a slow start in the first two months of the year, sales picked up strongly from March onwards driven by good demand in key markets, it said.
“Q3 was overall a very strong [quarter] for Southern Europe and the Sales and Distribution [division], pulled back by lower performance in Northern Europe, more specifically in the U.K., while results for our Irish entities are very satisfactory,” ISI CEO Bjarni Ármannsson said. “Our U.K. operations continued to have negative results and as stated in previous quarterly announcements, due to a combination of ramping up a renovated factory, dealing with challenging logistics from Southeast Asia and merging two factories in a period of COVID-19 issues and Brexit.”
Ármannsson said despite the challenges, ISI's outlook for the year hasn’t changed.
“We maintain our outlook for the full year of EUR 12 million to EUR 16 million (USD 13.5 million to USD 18.1 million) in normalized profit before tax for the full year,” Ármannsson said.
On 27 September, 2021, ISI acquired 85 percent of the share capital of Spanish smoked salmon company Ahumados Dominguez for EUR 12.4 million (USD 14 million). Ármannsson said the acquisition will further strengthen the group’s retail sales and market exposure.
“In addition, we now own a high-end consumer brand, which we are strengthening further with a nationwide marketing campaign in Spain this Christmas,” he said.
Citing good market conditions for light-salted cod products and Argentinean shrimp, ISI’s value-added Southern Europe division achieved sales of EUR 46.3 million (USD 52.2 million) in the last quarter, up 41 percent on same period last year. Its normalized PBT amounted to EUR 4 million (USD 4.5 million), compared with EUR 100,000 (USD 113,000) in Q3 2020.
Thanks to strong demand in Irish retail, the value-added Northern Europe segment increased its Q3 sales by EUR 4.6 million (USD 5.2 million) to EUR 29.6 million (USD 33.3 million). Its normalized profit before tax represented a loss of EUR 900,000 (USD 1 million) compared with a loss of EUR 100,000 (USD 113,000) a year previously.
Meanwhile, its Sales and Distribution segment posted sales of EUR 39.5 million (USD 44.5 million), some EUR 800,000 (USD 900,000) less than in Q3 2020, while its normalized profit before tax improved by EUR 200,000 (USD 225,000) to EUR 600,000 (USD 675,000).
In ISI’s value-added Northern Europe segment, the process of integrating its U.K. operation continued in Q3. The company said the transition is proving more complex and costly than anticipated, partially as a result of the current situation of global trade. The business continues to deal with challenges in terms of logistics and, more recently, a difficult U.K. labor market, it said.
While this has “significantly impacted” the business performance this year, ISI said it has secured new agreements with existing and new customers that will significantly increase production volume and the utilization of the U.K. facility. New business is coming on stream in Q4, and to a larger extent, in Q1 2022, which should balance the business, according to ISI.
The U.K. management team is also being strengthened, the company said. Glen Matthews, the former operations director of Hilton (formerly Icelandic Seachill), is joining the firm as operations director at the end of February 2022. At the same time, group CFO Reynir Jonsson is stepping in as interim managing director so that former managing director Danny Burton can concentrate on improving and expanding the company's production capabilities.
Ármannsson said COVID-19 continues to shape challenges and reduce visibility in the short-term.
“This is not exclusive to Iceland Seafood,” he said. “In general, demand for our products is good. Challenges are primarily with respect to securing availability of products, managing unstable logistics, and to put price increases of input into the price of the products we sell.”
The results in the U.K. speak to the challenges the company faces, he said.
“The challenge in this regard has been particularly hard in our U.K. operations. That comes forward in the numbers in the short-term,” Ármannsson said. “In the long run, we see clearly that Brexit will bring us opportunities. There is a need for automated efficient processing facilities close to the consumer base in the U.K., [and] the same applies to Europe in general. The reliance on China as a production hub for the world is fading. The ongoing megatrend is bringing processing closer to the consumer. That is a trend we will benefit from.”
Photo courtesy of Iceland Seafood International