Icelandic Group shows signs of recovery – Fishupdate.com

Icelandic Group shows signs of recovery Published:  31 May, 2007

Bjogolfur Johannsson

THE Icelandic Group, which owns Coldwater Seafoods and Seachill in the UK, appears to be turning the corner, according to its first quarter results.

The Reykjavik-based holding organisation, controlling an international network of production and marketing companies, reported sales of 385.2 million euros (around £264 million) for the first three months of 2007. The figure is marginally up on the same period last year.

Earnings of profits before interest, taxes and depreciation (EBITDA) came out at 14.2 million euros (£9.5 million) and the operating profit was 9.5 million euros (6.5 million). The news is cheering for a group that has struggled against rising fish prices and other economic factors.

The group’s chief executive, Bjogolfur Johannsson, said Icelandic was seeing considerable changes for the better in its operating companies, many of which have had problems. While company sales were broadly similar to the same period in 2006, costs had dropped considerably and this was very positive news. He said many difficult decisions had been taken during the past 12 months, but he remained confident that the measures taken would show good results during the remainder of 2007.

The company closed its plant in Cambridge, Maryland six months early with the loss of 400 jobs and has now concentrated production at its more modern facility in Newport News, Virginia. US sales were down slightly, but the first quarter always falls during Lent which always produces its strongest sales period and the company said this year was no exception.

Although sales in the UK totalled 107.9million euros – down three per cent – moves to change the Coldwater operation at Grimsby were progressing. A lot of work in developing and producing new seafish-based ready meals at Grimsby was starting to show through in positive results.

A major restructuring programme is being carried out on the Humber, which has resulted in a small number of redundancies. But, given that the Coldwater workforce at Grimsby is over 800 strong, the job losses have been less than many feared when frozen fish production was transferred to France. Coldwater has another plant at Redditch in the Midlands that produces chilled ready meals for Marks & Spencer.

Elsewhere in Europe, Icelandic has reported mixed results, but the group’s Asian and Spanish divisions performed fairly well.

The good news is that costs – and the cost of fish in general – have stabilised and have actually been brought down in many areas. The rising price of fish was the main reason for Icelandic’s financial problems in 2005 and 2006.

The Reykjavik-based Glitnir Bank, which closely monitors the performance of seafood companies, says the results of Icelandic in the first quarter were in line with its expectations. Revenue growth was just one per cent, compared with the same quarter last year. External growth was eight per cent and sales therefore contracted by seven per cent from the previous year, which was a matter of concern for the company.

Glitnir adds: “Icelandic’s business environment in recent quarters has proved challenging. The world market price of raw materials has surged and Icelandic’s subsidiaries have had to feed that rise into pricing to its customers.

“It seems that the high retail price of seafood products has harmed sales, as is reflected in Icelandic’s interim statement now. Another explanation of the contraction in Icelandic’s sales is the continuing restructuring at several of the company’s subsidiaries. Thus, Coldwater (Grimsby) has changed its policy and now focuses only on chilled and frozen prepared foods. In light of difficult market conditions, it is important that the group succeeds in cutting costs in order to improve results.”

The Bank says Icelandic has a large net interest bearing debt of 571 million euros, which means results have to be improved substantially, if an acceptable return is to be achieved.

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