Iceland Seafood International hf: Group normalised profit before tax for 2020 expected to be in the range from €3.8 to 5.0m

Iceland Seafood operational update

Based on the latest sales numbers and outlook for the remainder of the year, the group expect the normalised profit before tax for 2020 to be in the range from €3.8 to 5.0m.  Uncertainty is still significant and many factors can contribute to fluctuations in such a forecast.

The weeks before Christmas are an important trading period for key businesses within the group and will therefore influence the overall results for the year.  These weeks are also a high season for fishing and production of Argentinean shrimp, which can be significantly influenced by external factors such as weather and fishing rates.

As previously announced, all operation of Iceland Seafood Barraclough has been moved from its previous premises in Bradford to the new factory in building in Grimsby, the sale of facilities in Bradford were completed Mid-November.  Operations of Havelok will be moved to the new premises before year end, at that time the merger in UK will be fully completed.  The factory has passed all customers audits during the last few weeks and launching of breaded products for retail are taking place during December.  The process of merging the operation has been more complicated and costly than anticipated in the beginning, not helped by the challenging external environment impacted by both Covid19 and the ongoing Brexit uncertainty.  Restrictions on personnel and delivery of equipment etc. have been big contributors in addition to contingency planning and logistical issues. The state of the art factory and strong relationship with key customers does create an excellent platform for the merged business going forward.

December is a key sales period for smoked salmon in Ireland, which is primarily sold to customers within the local retail sector.  Production both at Oceanpath and the recently acquired Carr & Sons has gone well.  Retail demand is expected to remain strong both in UK and Ireland.  The outlook for Ireland is therefore strong for December supported by reasonably low raw material prices.  

The restrictions that were put in place in key markets during October to control the Covid19 outbreak severally impacted sales, especially in S-Europe.  After some easing of restrictions late November sales have picked up to some level but uncertainty remains high for the coming weeks. Prices have remained relatively stable during Q4, which has helped margins.

The Rawson season (a key production season for Argentinean shrimp) started in November this year.  Our Argentinian entity Achernar has produced over 750MT during this season which is in line with expectations before the season.  Sales are going well and the outlook for both December and the overall season is positive.

Estimation Covid19 impact

Overall, the operations of Iceland Seafood have been significantly impacted by Covid19 restrictions during 2020.  The Group estimate the total impact of these on profit before tax to be in the range of €10-12m. Majority of the Group sales are to the HORECA and foodservice sectors that have been significantly impacted by the situation. Lower sales to customers within these sectors explain largest part of the overall impact.  In addition to that price developments have impacted margins negatively and the cost of higher inventory levels, disruption in supply chains and various contingency plans have also had negative impact.

With the investment in UK, the acquisition of Carr & Sons in Ireland and the consolidation in S-Europe the Group has managed to strengthen its position significantly during a challenging year.  At the same time, the balance between retail and foodservice sales has been improved.  It is expected that around 50% of Group future profit generation will come from retail, compared to c.a. 33% in 2019.