August 30, 2022

 

Iceland Seafood sees 14% rise in sales during first half of 2022

 

 

Iceland Seafood International (ISI) reported a 14% uptick in sales in the first half of 2022, but that wasn't enough to overcome higher operating costs, as the Reykjavik, Iceland-headquartered seafood company posted a normalised loss before tax of €1.8 million (US$1.8 million) in H1 2022.

 

While its total sales in H1 2022 reached €238.4 million (US$238 million), its bottom-line loss of €2.9 million (US$2.4 million) reversed a profit of €3.4 million (US$3.4 million) in H1 2021.

 

"The first half of the year has been a disappointment for Iceland Seafood," ISI chief executive officer Bjarni Ármannsson said.

 

Ármannsson said during the COVID-19 pandemic, ISI emphasised rebalancing its business through more retail exposure, but that shift has made it harder to pass through higher input costs to customers in the retail sector.

 

"It is like chasing your own tail," Ármannsson said. "This has left us with a higher cost base, which then results in a negative bottom line. We are now experiencing slower demand as prices have increased, which then is reflected in lower raw material prices as demand side softens."

 

Whitefish prices of all origins have increased significantly, with cod prices rising by 25% over the first six months of 2022, and salmon prices reaching a historically high level in May, up 90% from the start of the year, Ármannsson said. ISI's operations in Ireland and at subsidiary Ahumados Domínguez, a Spanish seafood processor ISI purchased in May 2021, were especially impacted by these increases, Ármannsson said.

 

However, salmon prices have now leveled off at the same time as price increases have been passed on to customers, which Ármannsson said would bring profitability at ISI's Irish operations and at Ahumados Domíngues back to normal levels from the third quarter of 2022.

 

ISI's H1 2022 sales within its Value-Added Southern Europe division amounted to €108.8 million (US$108.6 million), up 27% year-on-year, due largely to price increases. Demand for its cod products was strong in the period and market conditions for its Argentinean shrimp was stable, though production of Argentinian shrimp at ISI subsidiary Achernar was 30%, down 30% by volume over H1 2021.

 

Additionally, Iceland Seafood's UK operations were loss-making in the period, with external challenges continuing to impact the business, Ármannsson said. He added that "it has become clear" that it will take longer and cost more than previously estimated to stabilise the firm's U.K. operations, despite the hiring of former Hilton seafood production director Glen Mathews who was appointed managing director of ISI's UK operations in February 2021.

 

"On top of negative impact of cost increases during H1 2022, the outbreak of omicron COVID-19 had a disruptive impact on both operations and logistics in the beginning of the year," Ármannsson said.

 

Further complication ISI's UK operations was a fire that broke out August 25 along a coating line at the company's Grimsby, UK plant.

 

The company estimated its UK operations will continue to be loss-making through 2022, but will break even in H1 2023. Ármannsson said the UK division must push to realign sales prices with market conditions and to grow the business with both current and new customers.

 

Elsewhere in the company, ISI's sales and distribution division performed well in the six-month period, driven by strong demand for Icelandic products, according to Ármannsson. Divisional sales of €87 million (US$86.9 million) were up €10.2 million (US$10.2 million), despite the closure of the firm's US sales division at the end of 2021. Growth was driven by significant price increases in the period, while the volume of groundfish and pelagic sales were down 9% and 22%, respectively.

 

Continuing supply chain disruptions and global tariffs and sanctions on Russian products are having positive impact on demand for Icelandic products both in Europe and the United States, the company said.

 

ISI's outlook range for its 2022 normalised profit before tax has been revised to €9-14 million (US$9-14 million), with most of the profit expected to be generated in Q4 2022.

 

"We are more optimistic for the second half [of 2022], as we see input prices of raw material stabilise or on a downward trend," Armannsson said. "We firmly believe that we have a strong position in our markets and that we will be able to make the most of that position for the upcoming months."

 

- SeafoodSource