Eimskip: Performance in first 9M in line with expectations

Highlights of Q3 2019 results

• Revenue amounted to EUR 172.5 million, a decrease of EUR 9.6 million or 5.3% when compared with the same quarter in 2018
• Transported volume in liner services decreased by 5.1% affected by lower level of import to Iceland and lower export volume during July and August in Iceland and the Faroe Islands. The decline was partially offset by strong growth in Trans-Atlantic.
• Volume in forwarding services decreased by 10.3% however profitability increased compared to last year due to improved margins and streamlining measures.
• Salary cost and related expenses decreased by 5.3% between years, whereas other operating expenses decreased by 6.0% excluding IFRS 16.
• EBITDA amounted to EUR 22.7 million in the third quarter or EUR 17.7 million (excluding IFRS 16) compared to EUR 17.6 million in the same quarter last year.
• EBITDA in the quarter was in line with expectations.
• Net earnings in Q3 amounted to EUR 7.1 million, compared to 6.3 million in the same quarter last year an increase of EUR 0.8 million.
• Net cash from operating activities (IFRS 16 adjusted) decreased and amounted to EUR -1.7 million compared to EUR 10.6 million in the same quarter of 2018 mainly due to seasonal changes in working capital.

Highlights of 9M results

• Revenue amounted to EUR 504.0 million, a decrease of EUR 6.3 million or 1.2% when compared with the same period in 2018.
  • Revenues e.g. affected by lower volume in container liner and decrease in international freight rates.
• EBITDA amounted to EUR 56.7 million or EUR 41.4 million (excluding IFRS 16) compared to EUR 39.8 million in the same period last year, an increase of 4.1%.
• Net earnings amounted to EUR 7.2 million, compared to EUR 9.3 million in the same period of 2018.
• A one-off tax expense in the amount of EUR 3.4 million negatively affected the results. Normalized earnings therefore EUR 10.6 million or EUR 1.3 million higher than last year.
• Total CAPEX for the period amounted to EUR 32.7 million compared to EUR 34.2 million in 9M 2018. Planned investments in 2019 amounting to EUR 36 million delayed to 2020, mostly due to delay in delivery of the two new vessels.
• Net cash from operating activities (IFRS 16 adjusted) increased and amounted to EUR 26.7 million compared to EUR 20.7 million in the same period of 2018.
• Total equity amounted to EUR 237.1 million, an equity ratio of 45.1%. Equity ratio was 48.0% (excluding the effect of IFRS 16) compared to 49.1% at year-end 2018.
• Dividend amounting EUR 4.7 million was paid in the year and a share buy-back program was initiated and completed amounting to EUR 3.6 million market value.
• Leverage ratio was 2.6 at the end of third quarter, compared to 2.80 at the end of 2018, a positive development between periods.
• Target long-term capital structure and a three-year target CAPEX plan introduced.
• EBITDA guidance for 2019 narrowed to the range of EUR 52-55 million.

VILHELM MÁR THORSTEINSSON, CEO

“I am satisfied with the overall performance in the third quarter and first nine months of the year which was in line with expectations despite lower import levels to Iceland. I am pleased to see that EBITDA and net profit of our forwarding operations increased between years although volume declined as a result of discontinued business and trade tension.

International operations are performing in line with expectations. Our operations in Norway continued to improve after various streamlining measures earlier this year and the Trans-Atlantic service has been growing by double digit numbers in 2019 which has positively affected e.g. the North America operation. In Q3 a decision was made to close down our Eimskip office in Belgium and integrate part of the operation into the Eimskip Rotterdam office. This measure will result in reduction of 11 FTE’s. A one-off redundancy payment will be expensed in Q4 but an annual operational improvement of EUR 0.3-0.4 million is expected as a result of this initiative going forward. Our office in Murmansk was closed in Q3 and responsibility of the area moved to Sortland in Norway. Furthermore, in 2019 we have merged or consolidated few other offices into single locations. This is in line with the current journey to streamline and focus on core operations.

Container liner services continue to be affected by lower import volume levels to Iceland due to the cool down of the Icelandic economy. Export was slow during the summer, both from Iceland and the Faroe Islands but picked up in late August. Overall, the volume to and from Faroe Islands has been on track year to date.

I am pleased to see Domestic Iceland performing well although affected by lower import levels and challenging environment.

Streamlining and integration projects are paying off as can be seen in lower cost e.g. in head office functions and operations in general. Salary expenses are down by EUR 4.7 million year on year whereof EUR 3.4 million are due to streamlining measures. Total number of FTE’s reduced by 55 during the year and are now 1750.

A new container sailing system was introduced in October. With simplified sailing routes and larger vessels, we are able to increase service and reliability in the system as well as lower fixed operating cost. Target net operating cost reduction of the new sailing system, including the cooperation with Royal Arctic Line, is in the range of EUR 7-9 million on an annual basis.

As previously announced the shaft generator of Bruarfoss, one of our newbuildings, was unfortunately damaged during testing.  As a result, we see a further delay in the cooperation with Royal Arctic Line and currently it is estimated to start in Q2 2020. We expect the delivery of Dettifoss in Q1 and Bruarfoss in Q3 of 2020. We are currently in discussion with the shipyard in China regarding next steps and compensation for the delay in delivery.

Finally, I would like to mention that we are introducing a target long-term capital structure and a three-year target CAPEX plan. Our aim is to maintain an equity ratio near 40% and to have modest leverage ratio of 2-3x net interest-bearing debt against EBITDA. Our aim is to increase transparency and predictability and increase service to investors and capital market analysts.”

FURTHER INFORMATION

• Egill Örn Petersen, CFO, tel.:
• Edda Rut Björnsdóttir, Head of Marketing- & Communication, tel.: , email:

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