Iceland Seafood International posts losses in 2022, rethinks sale of UK operations

Reykjavik-headquartered Iceland Seafood International (ISI) posted a net loss for FY 2022 as cost increases and raw material volatility cut into its margins.

The company posted a net loss for 2022 of EUR 9.9 million (USD 10.4 million), compared to an EUR 8.8 million (USD 9 million) profit in 2021. While the company posted a higher sales value – up 11 percent from 2021 to EUR 420.8 million (USD 446 million) – losses from Iceland Seafood U.K. were a drag on the company’s profits. 

The higher sales value, the company said, was not correlated with higher sales volume as pushback on higher prices “impacted demand negatively, especially in Q4,” the company said. As a result, the company’s sales volume dropped by 6 percent.

“The year 2022 was a challenging year in every sense of the word, which is highlighted by our EUR 9.9 million bottom-line loss and reduction in our equity ratio level below our target. The year was characterized by the war in Ukraine, which caused disruptions in supply chains and excessive increase in input costs – which we struggled to push on to our customers, and in any case, with a time lag,” ISI CEO Bjarni Ármannsson said. “As input prices continued to increase, we were constantly pushing through insufficient price increases, once they came through the system. This vicious cycle costed us dearly.”

Losses from the company’s U.K. division were a drag on the company’s finances in 2022. The company lost EUR 18.2 million (USD 19 million) from the U.K. division in 2022. ISI announced it plans to exit the U.K. value-added market and close its Grimsby, U.K. operations in November 2022, citing the fact the U.K. operations were loss-making.

In its full-year results the company said it entered into negotiations with two prospective buyers for the operations in December, but neither attempt was successful. Now, ISI is planning to reverse its original decision to sell the plant: on 3 February, the company announced it would continue to operate its UK subsidiary, but that it “intends to support further consolidation of the U.K. seafood processing industry, at the right terms.”

“Iceland Seafood had a particularly rough period in our UK operations, and in November, we decided to put our Value-added assets in Grimsby for sale,” Ármannsson. “It was then the results of our evaluation in the beginning of February this year to continue the operation as we believe we are better off that way.” 

Despite the negative performance in the U.K. in 2022, ISI said that the division’s results have improved and that it expects “to reach a positive EBIT level from Q2 onwards” at the U.K. location.

“Progress has been made with recovering the unprecedented inflationary costs from the beginning of 2023 and by securing a significant amount of new business, with the majority coming in from the beginning of Q2,” ISI said. “At the same time, new production equipment that arrived in December 2022 and January this year has transformed production with both a substantial increase in throughput and a reduction in production costs.”

As of now, ISI said, the U.K. operations are “classified as discontinued” and is being classified as an asset held for sale in the 2022 financial statements.

“With Iceland Seafood UK classified as an asset held for sale, the VA N-Europe division consists only of the operation of Oceanpath and Carr&Sons in Ireland,” ISI said.

Ármannsson said that the company is optimistic that the volatility that resulted in its losses appears to be abating in 2023.

“We are now seeing cost of input factors stabilize, and in some cases, decline, so we are now operating in a more normal environment,” he said.  

Photo courtesy of Iceland Seafood International