Iceland Seafood International’s (ISI) total sales for the first nine months of 2023 increased slightly year over year to EUR 318.1 million (USD 347.4 million), but the company experienced a significant slowdown in this year’s third quarter, when its sales slipped 12 percent year over year to EUR 95.8 million (USD 104.6 million).
The Reykjavik, Iceland-based seafood firm underwent a change in leadership in September 2023, with ISI CEO Bjarni Ármannsson stepping down after five years in the position and replaced by Brim Chief Operating Officer Ægir Páll Friðbertsson.
High inflation and increased interest rates have negatively affected customer purchasing power and demand, Friðbertsson said during the company’s Q3 2023 results presentation. Consequently, prices of whitefish and shellfish have come down in recent months, leading to lower margins, especially in the company’s value-added Southern Europe (VA S-Europe) division. Sales for VA S-Europe in the first nine months of 2023 totaled EUR 158.2 million (USD 172.8 million) – down 3 percent from last year, with the division’s Q3 sales declining 18 percent.
Friðbertsson confirmed that declining consumer purchasing power in the group’s main trading countries, together with ongoing uncertainty due to current geopolitical turmoil and unusually warm weather during the summer led to lower Q3 sales. Increases in interest rates have also brought rising capital costs, and the lower price of whitefish and shellfish has led to inventory write-offs and a lower margin on product sales.
“Price adjustments are taking place which are painful in the short term but create a basis for healthier long-term demand,” he said.
Friðbertsson said with “great uncertainty” in global economic affairs ISI’s short-term focus will be on improving the operations of existing business units, the company’s capital structure, and reviewing the company’s strategy.
“The goal will be to make Iceland Seafood ready to meet its challenges and opportunities in the future, which I believe will be beneficial to the company, owners, and staff,” he said.
In the first three quarters of the year, ISI reported a normalized loss before tax of EUR 1.9 million (USD 2.1 million), compared to a profit of EUR 8.7 million (USD 9.5 million) in the corresponding period of 2022. Its net losses stood at EUR 20.7 million (USD 22.6 million) for the year at the end of September, compared to a loss of EUR 5 million (USD 5.5 million) previously. Costs also increased by EUR 1.8 million (USD 2 million) compared to 2022.
But Friðbertsson said Q4 is typically key trading period for the group, as it traditionally features elevated Christmas sales of smoked salmon, and the summer production season for Argentinian shrimp starting to pick up at the end of November. Additionally, the company benefits from seasonal peaks in cod sales through its IS Iberica sector in October and November. Its annual profitability therfore largely depends on the events that transpire in Q4, especially in December, the company advised.
Nevertheless, for 2023 as a whole, ISI is forecasting a lower profit before tax range of EUR 500,000 to EUR 2 million (USD 546,000 to USD 2.2 million). It had EUR 420 million (USD 461.6 million) in total sales in 2022 on 72,000 metric tons of products sold.
ISI’s sales and distribution division achieved total sales of EUR 133.7 million (USD 146 million) during the first nine months of 2023, up 1 percent compared to the same period last year. The company attributed the higher sales to solid performance in all product categories out of Iceland, while its French and German sales decreased. The division’s net margin in the first nine months of the year totaled EUR 5.5 million (USD 6 million), which was EUR 600,000 (USD 655,000) lower than a year previously. With its operating costs at the same level, but finance costs slightly higher due to increased interest rates, the division’s normalized profit before taxes of EUR 1.8 million (USD 2 million) was down EUR 700,000 (USD 765,000) compared to the same period of 2022.
The company’s value-added Northern Europe division (VA N-Europe), meanwhile, realized profits of EUR 900,000 (USD 983,000) in the period, reversing a EUR 1 million (USD 1.1 million) loss a year previously.
The company finalized the sale of Iceland Seafood UK (IS UK) to Danish value-added seafood producer Epersen in Q3 2023. Following the sale of IS UK, the VA N-Europe division consists solely of ISI’s operations in Ireland. Friðbertsson called that move a “discontinuation of the activity that has played the most significant role in the poor operating results of recent years.”
What remains are “strong value-added companies in Spain and Ireland that will be profitable in the future,” he said.
ISI acknowledged a EUR 40 million (USD 44 million) reduction in its total assets from the beginning of 2023 to EUR 205.3 million (USD ) driven by the sale of IS UK and reduced inventories. The company’s net debt has risen to EUR 115.6 million (USD 127 million), up EUR 22 million (USD 24.2 million) from the beginning of 2023.
Photo courtesy of ISI
