Eimskip: Second quarter 2024 results | 20.08.24

Highlights of Q2 2024 Results

Acceptable results given reduced demand in Iceland and a four-week strike in the Faroe Islands, while International Forwarding performed well
Sales remained at the same level as last year, amounting to EUR 210 million in the quarter
- - Liner shipping turnover decreased by EUR 12.9 million, while forwarding turnover increased by EUR 13.0 million.
  - The decline in liner shipping revenues is mainly explained by lower transatlantic rates, lower import volume and a different export cargo mix in Iceland and a four-week strike in the Faroe Islands
  - Increase in forwarding revenues due to higher global freight rates, particularly on trade routes linked to Asia
Expenditures amounted to EUR 186 million, an increase of EUR 10.9 million, caused by the costs of third-party logistics services, which increased by EUR 10.8 million compared to the previous year.
- - Bunker costs increased marginally by EUR 0.6 million and newly imposed ETS costs amounted to EUR 0.9 million in the quarter, which is covered by revenue management.
  - Salary costs increased by 2.9% or EUR 1.1 million, partly offset by a 2% decrease in the number of FTEs compared to the same quarter last year.
EBITDA amounted to EUR 23.5 million, compared to EUR 34.3 million in a strong quarter last year
- Liner’s EBITDA amounted to EUR 15.1 million, down EUR 10.8 million compared to a strong quarter last year. Liner’s calculated EBITDA ratio was 10.6% and the EBIT ratio was 1.6%.
- The estimated negative EBITDA impact of the four-week strike in the Faroe Islands amounts to EUR 1.8 million.
- Forwarding EBITDA remained stable compared to last year at EUR 8.4 million and the calculated forwarding EBITDA ratio was 10.0%
EBIT for the quarter was EUR 8.6 million, compared to EUR 19.4 million in Q2 2023
Net profit amounted to EUR 7.9 million, compared to EUR 17.0 million for the same period in 2023.

HIGHLIGHTS OF THE 6M 2024 RESULTS

Sales amounted to EUR 405.5 million, a decrease of EUR 18.6 million or 4.4% compared to the same period in 2023.
Total expenditure amounted to EUR 367.8 million, an increase of EUR 9.8 million compared to expenditure in the same period last year.
EBITDA amounted to EUR 37.7 million, compared to an EBITDA of EUR 66.2 million in the same period last year, a decrease of EUR 28.4 million.
EBIT amounted to EUR 7.7 million, compared to an EBIT of EUR 35.2 million for the same period last year.
Net profit amounted to EUR 8.4 million, compared to a net profit of EUR 29.5 million in the same period of 2023.

VILHELM MÁR THORSTEINSSON, CEO

“We delivered acceptable results in the second quarter of 2024 as we saw business pick up after a challenging start to the year. EBITDA in the quarter amounted to EUR 23.5 million, down EUR 10.8 million compared to last year. This decline is almost entirely attributable to lower results in the Container Liner services, where a combination of lower rates and lower volume negatively impacted revenue, while operating costs remained at a similar level compared to last year. However, the Container Liner results improved significantly compared to the first quarter. We have been extremely focused on cost control, but given the inflationary pressure and wage increases of recent years, our efforts have only offset cost increases rather than reducing overall costs. On the revenue side, it was positive to see that our export volume from Iceland increased compared to last year, although a different category mix caused a slight decline in unit revenue compared to last year. On the other hand, there was a decline year-on-year in demand within selected import categories to Iceland, namely cars and building materials, while other categories such as groceries and other consumer goods remained stable. A decline in these specific categories was to be expected in response to a prolonged period of elevated interest rates in Iceland. We remain hopeful that we will see some easing of monetary policy before this decline in demand spills over into other categories, causing an unnecessary hard landing for the Icelandic economy.

In addition, a four-week long strike in the Faroe Islands had a material impact on container liner services, negatively impacting import and export volumes and resulting in an estimated negative impact of EUR 1.8 million on EBITDA at group level. Volume in transatlantic services was at a similar level to the same quarter last year, but increased significantly compared to the first quarter of this year when the market was quite challenging. Transatlantic rates did not increase to the extent we expected in the quarter and were significantly lower than last year, although it was positive to see an improved balance between eastbound and westbound cargo, which improved our vessel utilisation. Finally, our Norwegian Reefer Liner services performed well in the quarter thanks to strong volumes of exported whitefish and shrimp.

Global shipping markets remain highly volatile and we saw an increase in global freight rates during the second quarter, driven by factors such as the situation in the Red Sea, which is restricting commercial traffic through the Suez Canal, combined with a healthy recovery in some major economies. These high rate levels, combined with volume growth, contributed to our International Forwarding business performing well in the quarter, with financial results in line with the same quarter last year and a good improvement on the first quarter this year.

Portwise, an international consultancy firm, recently conducted a review of the operational structure of terminal services in Sundahöfn. Their conclusion is that the current arrangement is considered best practice from an international perspective and thus the most preferable option for the interests of Icelandic import and export customers and also for Faxaport. Eimskip remains true to its commitment to providing excellent customer service. It is often challenging to operate a shipping company in the harsh environment of the North Atlantic and we are well aware of the important role we play in Iceland’s supply chain, which is heavily dependent on shipping, as a remote island nation. Our customers’ needs are in many cases quite specific and require tailor-made solutions that differ in many ways from the services provided by global shipping companies that sail between continents and mainly transport non-time-sensitive cargo on ultra-large container vessels. Investments in the Icelandic fisheries sector over the past decades that have focused on increasing efficiency and quality, both in fishing and processing, together with the development of salmon farming, have resulted in increased exports of fresh and fully processed products. This value-added development has required greater speed and flexibility in the supply chain, particularly with regard to shipping. Likewise, the growing demand from Icelandic consumers for access to fresh imported food has led to the development and adaptation of shipping to deliver such goods quickly and reliably to Icelandic wholesalers and retail chains. Our unique business model, based on the integration of shipping, terminal services and freight forwarding, is fundamental to flexibility and efficiency in Eimskip’s services, enabling us to meet the high demands of Icelandic consumers nationwide and ensure the quality of our valuable seafood products when they reach foreign markets.

The start of the third quarter is promising and we are optimistic that results will improve compared to the second quarter. September marks the start of a new fishing quota year in Iceland and this is expected to increase export volumes, but there is still uncertainty about the direction of the Icelandic economy. Exports from the Faroe Islands have been somewhat affected by a lack of mackerel in recent weeks as the fishery has slowly started to pick up, but fresh fish exports have remained at a solid level. Furthermore, the outlook is promising with signs that the mackerel catch is increasing in volume and quality, and the salmon harvest is expected to peak in the third quarter. Meanwhile, imports to the Faroe Islands have remained stable and the significant infrastructure investment planned on the islands could have a positive impact on volumes in the coming quarters. In the international freight forwarding business, we have seen some easing of global freight rates in recent weeks, possibly due to the peak summer season in Europe. The outlook is generally good, but the effects of prolonged disruption to global supply chains and increasing geopolitical tensions on shipping capacity and global trade remain to be seen.”

INVESTORS MEETING 21 AUGUST 2024

The Board of Directors of Eimskipafélag Íslands hf. approved the Company’s condensed consolidated interim financial statements for the second quarter of 2024 at its meeting on 20 August 2024. Investors and market participants are invited to a meeting on Wednesday 21 August 2024 at 8:30 at the Company’s head office, Sundabakki 2, second floor. The meeting will also be broadcast live in Icelandic on www.eimskip.com/investorsVilhelm Már Thorsteinsson, CEO, and María Björk Einarsdóttir, CFO, will present the company’s financial results for the second quarter of 2024. The investor presentation and a recording of the meeting will be available on the company’s investor relations website.

MORE INFORMATION

Guðbjörg Birna Björnsdóttir, Head of Treasury and Investor Relations, tel: +354 844 4752, email: [email protected]

FORWARD-LOOKING STATEMENTS

Statements in this financial press release that refer to the estimated or expected future results or future activities of the Company are forward-looking statements that reflect the Company’s current analysis of existing trends, information and plans. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially depending on factors such as the availability of resources, the timing and effect of regulatory actions and other factors. Eimskip assumes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement.