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Icelandic Salmon AS

Quarterly Report May 15, 2008

3632_er_2008-05-15_bb0f3667-be57-4673-ae73-11bd6d0c0174.pdf

Quarterly Report

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Press release Reykjavík, 15 May 2008

Icelandic Group – 1st Quarter 2008:

Operation on budget – Cost reduction 17%

Strengthening of the Euro results in a currency exchange loss of €7.5 million.

First Quarter Financial Highlights 2008

  • Sales € 321.1 million
  • 11% reduction in revenues considering effects from changes in currency
  • Earnings before interest, taxes and depreciation, (EBITDA) amounted to € 11.8 million
  • Operating profit (EBIT) € 7.3 million
  • Net earnings amounted to a loss of € 7.3 million
  • Interest bearing liabilities decrease by € 37 million
  • Cash provided by operation before taxes and interest amounted to € 32.9 million
  • Total assets amounted to € 723 million equity ratio 16.1%
  • Inventories decrease by € 43.7 million in the quarter
  • The Group's total debts reduce by € 57.1 million in the quarter

Icelandic Group CEO Finnbogi A. Baldvinsson, commented:

Icelandic Group's operation was in line with management's expectations in the first quarter of 2008. This is certainly a positive sign, however the variance is due to financial items. Icelandic Group currently operates in many different markets and currency exchange development has a substantial effect on its financial results. Currency loss in the quarter amounted to € 7.5 million compared to € 55,000 in the first quarter of 2007, however interest bearing liabilities decrease by € 37 million, which is partly due to the strengthening of the Euro.

We have achieved to decrease the operational cost of the group substantially or by 17% in the quarter compared to first quarter last year.

The convertible loan, which has been granted to the company, makes us ready for the large projects which awaits us. I´m assure that the operation will deliver better results later in the year.

Income statement - quarterly summary
Amounts in € ´000 Q1 2008 Q4 2007 Q3 2007 Q2 2007 Q1 2007
Sales 321.082 327.784 327.428 344.001 385.161
Cost of goods sold (287.009) (299.355) (293.661) (312.604) (342.927)
Gross margin 34.073 28.429 33.767 31.397 42.234
Other operating income 1.417 4.318 1.934 1.230 1.656
Other operating expenses (28.060) (47.439) (31.712) (33.136) (34.334)
Share of (loss) profit of equity accounted
investees (105) (70) (274) (11) (43)
EBIT 7.325 (14.762) 3.715 (520) 9.513
Financial expenses (15.161) (12.620) (8.781) (1.214) (5.872)
Pre-tax (loss) profit (7.836) (27.382) (5.066) (1.734) 3.641
Income tax 583 (1.609) 2.517 1.650 (1.354)
Net (loss) earnings for the period (7.253) (28.991) (2.549) (84) 2.287
EBITDA 11.883 1.367 8.506 4.295 14.170
EBITDA ratio 3,7% 0,4% 2,6% 1,2% 3,7%
Balance sheet - five year review
Amounts in € ´000
31.3.2008 31.12.2007 31.12.2006 31.12.2005 31.12.2004
Non-current assets 348.146 366.146 407.282 275.231 142.400
Current assets 374.808 429.917 499.468 415.184 279.994
Total assets 722.954 796.063 906.750 690.415 422.394
Equity 116.282 132.330 176.241 116.741 35.759
Non-current liabilities 182.535 195.442 228.182 142.837 112.860
Current liabilities 424.137 468.291 502.327 430.837 273.775
Total equity and liabilities 722.954 796.063 906.750 690.415 422.394

Operating results for Q1 2008

Accounting Policies

The same accounting policies are used in the preparation of this quarterly report as in the preparation of the annual report for the year 2007.

Income statement - key figures
Amounts in € ´000
Q1 2008 Q1 2007 Change%
Sales 321.082 385.161 -16,6%
Cost of goods sold (287.009) (342.927) -16,3%
Gross margin 34.073 42.234 -19,3%
Other operating income 1.417 1.656 -14,4%
Other operating expenses (28.060) (34.334) -18,3%
Share of (loss) profit of equity
accounted investees (105) (43) 144,2%
EBIT 7.325 9.513 -23,0%
Net financial expenses (15.161) (5.872) 158,2%
Pre-tax (loss) profit (7.836) 3.641 -315,2%
Income tax 583 (1.354) -143,1%
Net (loss) earnings (7.253) 2.287 -417,1%
EBITDA 11.883 14.170 -16,1%
EBITDA ratio 3,7% 3,7%
Earnings per share (0,0025) 0,0008

Net sales over the quarter amounted to € 321.1 million, as compared to € 385.2 million in Q1 2007. This represents an decrease of 16,6%. Main reasons for the lower sales is strengthening of the euro against other major currencies, asset sale of OTO along with lower sales in some of the companies markets due to world economical recession.

Business segments

Sales within business segments during the quarter were as follows:

Business segments
Amounts in € ´000
Q1 2008 Q1 2007 Change%
Production companies 262.017 320.050 -18,1%
Sales and marketing companies 131.593 150.065 -12,3%
Service and holding companies 640 4.548 -85,9%
394.250 474.663 -16,9%
Intercompany sales (73.168) (89.502) -18,2%
Total sales 321.082 385.161 -16,6%

Earnings before financial items (EBIT) amounted to € 7.3 million as compared to € 9.5 million Q1 2007.

Earnings before interest, depreciation and taxes (EBIDTA) amounted to € 11.8 million, as compared to € 14.2 million in Q1 2007.

Net financial expenses over the period amounted to € 15.2 million, as compared to € 5.9 million in Q1 2007. Loss on currency fluctuation in the quarter amounted to € 7.5 million compared to a loss of € 0.1 million in Q1 2007.

Income tax for the quarter amounted to € 0.6 million, which corresponds to a tax ratio of 7,4%.

Loss over the quarter amounted to € 7.3 million, as compared to profit of € 2.3 million in the same quarter of the preceding year.

Balance Sheet

Balance sheet - key figures
Amounts in € ´000 31.3.2008 31.12.2007 Change%
Non-current assets 348.146 366.146 -4,9%
Current assets 374.808 429.917 -12,8%
Total assets 722.954 796.063 -9,2%
Equity 116.282 132.330 -12,1%
Non-current liabilities 182.535 195.442 -6,6%
Current liabilities 424.137 468.291 -9,4%
Total equity and liabilities 722.954 796.063 -9,2%

Icelandic Group's total assets at the end of March amounted to € 723 million, as compared to € 796.1 million at year-end 2007.

Non-current assets amounted to € 348.1 million at the end of March, as compared to € 366,1 million at year-end 2007. Intangible assets amounted to € 217.0 million, as compared to € 227.0 at year-end 2007.

Current assets amounted to € 374.8 million, of which inventory accounted for € 198.8 million, as compared to € 242.5 million at year-end 2007.

Total liabilities at the end of March amounted to € 606.7 million, as compared to € 663.7 million at year-end 2007. Net liabilities (total liabilities net of current assets) amounted to € 231.9 million, as compared to € 297.6 million at year-end 2007. Interest-bearing debts amounted to € 477.6 million, as compared to € 514.5 million at year-end 2007.

Equity amounted to € 116.3 million compared to € 132.3 million at year-end 2007. The equity ratio was 16.1%, compared to 16.6% at year-end 2007.

Cash Flow

Statement of Cash flows
Amounts in € ´000 2008 2007 Change %
Cash generated from operations 32.926 10.722 207%
Net cash from operating activities 26.968 3.374 699%
Net cash from in investing activities (7.644) (2.381) -221%
Net cash (used in) from financing activities (19.478) 8.627 -326%
Increase (decrease) in cash and cash equivalents (154) 9.620 -102%

Net cash from operation before taxes and interest amounted to € 32.9 million, as compared to € 10.7 million in the same period 2007. Net of interest and income tax, net cash provided by operating activities amounted to € 27.0 million, while in the preceding year cash used in operations amounted to € 3.4 million. Net cash used in investing activities amounted to € 7.6 million compared to € 2.4 million in the same period 2007. Net cash used in financing activities amounted to € 19.6 million compared to net cash from financing activities of € 8.6 million in the same period 2007. Cash and cash equivalents at the end of March amount to € 26.7 million.

Events after the first quarter of 2008

Icelandic Group request removal from trading..

Following Icelandic Group hf.'s recent AGM, the Board of Directors of Icelandic Group hf. has requested to the NASDAQ OMX Nordic Exchange in Iceland that the company's shares to be removed from trading on the main market of NASDAQ OMX ICE.

Closure of Coldwater Redditch Site

Coldwater Seafood has reached agreement with the Redditch workforce and the trade union Unite to close the site following the 90 day consultation process which started in early March. Redundancy terms have been agreed with the workforce and an expected closure date of 6th June 2008 has been confirmed.

The meals business at Redditch will be transferred to Coldwater's two sites in Grimsby. A product transfer plan is underway along with the preparations to decommission the factory following the closure date.

Convertible Loan

Icelandic Group hf.'s Annual General Meeting authorized to take a convertible loan, as provided for in Chapter VI of the Act on Public Limited Companies, No. 2/1995. The Company is authorised to sign loan documents in ISK equal to EUR 41,000,000 and the loan period shall be 4 years. The final maturity date of the loan shall be on the fourth anniversary of the loan. During the period commencing 30 days prior to the final maturity date of the loan and until the final maturity date (inclusive), the lender shall be authorised to convert the principal of the loan, in addition to accrued interest, into shares in Icelandic Group hf. Upon conversion of the loan into shares, the conversion price shall be 1.0. The Company's Board of Directors is authorised to raise the Company's share capital by up to ISK 15,000,000,000 in nominal value so as to satisfy the above obligation. The Shareholders waive their priority rights to subscribe for shares issued under this authorisation.

Approval of the accounts

The Board of Directors of Icelandic Group hf. approved the accounts for the first quarter of 2008 at a meeting of the Board on 15 May 2008.

Investor Presentations

On Friday, 16 May, a presentation meeting will be held for market investors. The meeting will take place in the Company's premises at Borgartún 27, Reykjavík, starting at 8:30 a.m. At the meeting, the managers of the Company will present the interim financial statement. The presentation will be accessible at the Company´s website, www.icelandic.is and on the website of the OMX Nordic Exchange in Iceland (www.omxnordicexchange.com), following the meeting.

Reporting schedule for 2008

Q2 results 2008 Week 33 2008
Q3 results 2008 Week 46 2008
Q4 results 2008 Week 10 2009

Financial calendar is also available on the Icelandic Group website www.icelandic.is

Press releases

If you wish to receive Icelandic Group press releases by e-mail please register at http://icelandic.is/index.aspx?GroupId=39.

Further information

For further information, please contact:

Finnbogi A. Baldvinsson, CEO, tel. +49 1723 198 727

Reykjavík, May 15th 2008 Icelandic Group

About Icelandic Group

Icelandic Group (OMX Nordic Exchange: IG) consists of an international network of production and marketing companies selling seafood products on global markets. In several markets the company enjoys a prominent position of its brand ICELANDIC especially within the food service sector. The company is also a major supplier to the retail sector through its branded or private label production. The Group employees are around 4,600. The personnel include renowned experts in the fields of fishing and primary processing, product innovation and value-added processing, and in the worldwide marketing of seafood products.

Income statement - five year review
Amounts in € ´000 Q1 2008 2007 2006 2005 2004
Sales 321.082 1.384.374 1.471.316 1.200.257 802.624
Cost of goods sold (287.009) (1.248.547) (1.316.606) (1.084.702) (719.586)
Gross margin 34.073 135.827 154.710 115.555 83.038
Other operating income 1.417 9.138 10.587 4.761 5.811
Other operating expenses (28.060) (146.621) (160.533) (118.057) (66.156)
Share of (loss) profit of equity accounted
investees (105) (398) 700 154 (702)
EBIT 7.325 (2.054) 5.464 2.413 21.991
Net financial expenses (15.161) (28.487) (24.005) (21.740) (10.449)
Pre-tax (loss) profit (7.836)
(30.541)
(18.541) (19.327) 11.542
Income tax 583 1.204 7.118 4.235 (4.672)
Net (loss) earnings (7.253)
(29.337)
(11.423) (15.092) 6.870
EBITDA 11.883 28.338 36.946 16.222 28.941
EBITDA ratio 3,7% 2,0% 2,5% 1,4% 3,6%

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