Eimskipafélag Íslands — Earnings Release 2020

Aug 27, 2020

PRESENTATION OF Q2 RESULTS

Vilhelm Már Thorsteinsson, CEO

NEW CONSOLIDATED HEADQUARTERS

•THIS IS EIMSKIP

Eimskip is a leading transportation company in the North Atlantic providing container and reefer liner services with connections to international markets and is specialized in worldwide freight forwarding services with focus on frozen and chilled commodities

- Iceland Norway

• Asia Faroe Islands
• Europe N-America / TA

KEY HIGHLIGHTS FOR Q2 2020

3

4

EBITDA performance of Q2 is better than management expectations at the start of the quarter specially considering the impact of COVID-19

Streamlining measures and integration projects resulting in

• Salary cost down EUR 4m QoQ

• Container system savings EUR 2m compared to Q1

Co-operation with Royal Arctic Line commenced with arrival of the new vessel Dettifoss

EMPLOYEES

1612 -9.7% from 1.1.2020

-5.3%

REVENUE	EBITDA*	NET EARNINGS	NET CASH FROM OPERATION	EQUITY	NIBD
161	17	2	22	222
mEUR	mEUR	mEUR	mEUR	mEUR
-4.1% YoY	7.6% YoY	0.7% YoY	10.5% YoY	41.2%

-5.3% FORWARDING

LINER VOLUME

3.5x LTM EBITDA 201 mEUR

*Adjusted for EUR 1 million redundancy cost

Relevant lead indicators

ECONOMIC INDICATORS

PAYMENT CARD TURNOVER GALLUP CONFIDENCE INDEX

LANDED CATCH – ICELAND TOTAL IMPORT – EXPORT ICELAND excl. fuel & gas FUEL PRICE DEVELOPMENT PR. WEEK

LANDED CATCH – FAROE ISLANDS

Source: Central bank of Iceland Source: Gallup Iceland Source: www.vorn.fo

OPERATING ACTIVITIES

• Dettifoss first scheduled voyage from Denmark on July 8th
• Estimated delivery of Bruarfoss in early Q4 and in service later in the quarter
  • Net inflow from financing of approx. EUR 6m expected upon delivery of the vessel

The new 2150 TEUs vessels

Phase-in Vessel Sharing Agreement launched in June

VESSEL NEWBUILDING AND ROYAL ARCTIC LINE CO-OPERATION

Vessel Sharing Agreement (VSA)

• Started in June with phase-in setup
  • The vessels in service are Dettifoss from Eimskip and Tukuma Arctica from Royal Arctic Line
  • Port calls in Nuuk, Reykjavík, Aalborg, Aarhus and Helsingborg
• Planned to launch the full version of the VSA late October with additional connection to Faroe Islands

• Iceland's geographical position important factor towards Greenland
  • Opportunities to increase trade between the two countries
• Weekly sailings to Nuuk with short transit time from Reykjavík
  • Transit time from Reykjavík to Nuuk is ~4 days compared to 9 days between Aalborg and Nuuk
  • Opportunities to export fresh products from Iceland to Greenland and seafood from Greenland to various destinations through Eimskip's extensive sailing system

Opportunities arising for increased trade between Iceland and Greenland

GREENLAND GAINING ACCESS TO EIMSKIP'S TRANS-ATLANTIC SAILING SYSTEM

EXAMPLES OF PRODUCTS FOR IMPORT/EXPORT TO AND FROM GREENLAND

Container liner volume down 4.6% and reefer liner down 11.4% YoY in Q2

VOLUME DEVELOPMENT IN LINER SERVICES

• Import to Iceland down by 6.4% YoY in line with expectations at beginning of the year despite COVID-19
  • Gradually picked up towards the end of the quarter
• Export from Iceland increased by 2.0% YoY, which is above expectations
  • In line with landed catch in the quarter (2.3% YoY)
• Faroe Islands volume down by 11.0% YoY which is below expectations mostly due to less export of fresh salmon due to COVID-19
• Reefer liner down by 11.4% YoY due to capacity reduction following the sale of reefer vessels

Q2

• Export from Iceland up 0.5% despite landed catch being down by 10.2% YoY but less favorable volume mix
• Trans-Atlantic services down 5.3% which is below expectation and mostly due to COVID-19 impact in Q2

Strong reefer forwarding during the quarter

VOLUME DEVELOPMENT IN FORWARDING

• Reefer forwarding volume up 3.9% from last year
  • Mainly driven by increase in outbound cargo handling which is higher margin volume than inbound cargo
  • Reefer cargo has been less affected by COVID-19 than dry cargo
• Dry forwarding volume down 19.0% from last year which is below expectations, mostly due to COVID-19

Q2

6M

• Dry volume down by 15.1% due to;
  • Eimskip Belgium closed at the end of 2019
  • COVID-19 effects

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FINANCIAL RESULTS

EUR thousand	Q2 2020	Q2 2019	Change	%
Revenue	160,615	167,535	(6,920)	(4.1%)
Expenses Salary and related expenses	144,614 29,802	151,706 33,827	(7,092) (4,025)	(4.7%) (11.9%)
EBITDA	16,001	15,829	172	1.1%
Depreciation and amortization	(10,966)	(10,705)	(261)	2.4%
EBIT	5,035	5,124	(89)	-
Net finance expense	(2,402)	(1,526)	(876)	57.4%
Share of profit of equity accounted investees	473	85	388	456.5%
Net earnings before income tax	3,106	3,683	(577)	-
Income tax	(651)	(929)	278	-
Net earnings for the period	2,455	2,754	(299)	-
Key ratios	Q2 2020	Q2 2019
EBITDA ratio EBIT ratio Profit margin Return on equity	10.0% 3.1% 1.5% 4.3%	9.4% 3.1% 1.6% 4.7%

Profitability improves with realization of streamlining measures

INCOME STATEMENT Q2

• Revenue decrease by 4.1%

• Volume decrease however, partly offset by higher forwarding prices
• Decrease in BAF due to lower bunker prices
• Negative effect of COVID-19 on cruise agency and ferry operation
• Expenses down by 4.7%
  • Bunker price decrease
  • Cost savings in liner and equipment operation
  • Salaries decrease by 11.9% or EUR 4m despite EUR 1m redundancy cost
    • Managed FTE reduction EUR -3.1m
    • Currency effect EUR -2.3m
  • Savings in administrative expenses, somewhat related to COVID-19 e.g. travel expenses
• EBITDA adjusted for redundancy cost amounts to EUR 17m an increase of 7.6% YoY
  • Adjusted EBITDA ratio 10.6%
• Net finance expenses increased due to lease liabilities and currency exchange losses

EUR thousand	6M 2020	6M 2019	Change	%
Revenue	322,285	331,523	(9,238)	(2.8%)
Expenses Salary and related expenses EBITDA	296,946 59,555 25,339	302,472 66,547 29,051	(5,526) (6,992) (3,712)	(1.8%) (10.5%) (12.8%)
Depreciation and amortization EBIT	(21,898) 3,441	(21,458) 7,593	(440) (4,152)	2.1% (54.7%)
Net finance expense	(5,042)	(2,837)	(2,205)	77.7%
Share of profit of equity accounted investees	156	1	155	-
Net (loss) earnings before income tax	(1,445)	4,757	(6,202)	-
Income tax	(1,051)	(4,504)	3,453	-
Net (loss) earnings for the period	(2,496)	253	(2,749)	-
Key ratios	6M 2020	6M 2019
EBITDA ratio EBIT ratio Profit margin Return on equity	7.9% 1.1% (0.8%) (2.2%)	8.8% 2.3% 0.1% 0.2%

The first six months affected by a slow start of the year

INCOME STATEMENT 6M

• Revenues decrease by 2.8% as a result of less volume, bunker effects and discontinued operation of ferry Herjólfur
• Expenses
  • Salaries decrease by 10.5% or EUR 7m mostly as a result of managed FTE reduction, despite of EUR 1m redundancy cost
  • Realization on track of previously announced salary reduction amounting to EUR 11m on an annual basis
  • Cost of container sailing system reduced by EUR 2m in Q2 as estimated in Q1 investor presentation
• One-off tax expense amounting to EUR 3.4m in Q1 2019

6M

Streamlining measures positively affecting salaries and admin expenses

DEVELOPMENT AND NATURE OF EXPENSES Q2

EXPENSE BRIDGE Q2

• In general, increase/decrease in 3 rd party expenses is offset by higher/lower revenues e.g. in forwarding
• Savings in liner services and lower bunker prices positively affecting liner & equipment expenses
• Material decrease in salaries and admin expenses quarter on quarter
  • EUR 5m in salary reduction, thereof EUR 2m currency effects

Q2

Negative volume development affecting container liner performance but offset by streamlining measures and improved margins in reefer forwarding

EBITDA BRIDGE Q2

EBITDA BRIDGE BY BUSINESS ACTIVITY EBITDA BRIDGE BY OPERATING ITEMS

Profitability increasing in the quarter

RESULTS BY BUSINESS SEGMENTS

• Liner revenue affected by volume and devaluation of ISK
• Forwarding revenues increase despite lower volume on back of strong reefer business
• Profitability improving in Q2 both in liner and in forwarding
• Profitability increasing in forwarding for 6M while liner services is affected by poor Q1

Q2 AND 6M

EUR thousand	Q2 2020	Q2 2019	Change	%	6M 2020	6M 2019	Change	%
Liner Services:
Revenue	98,531	107,568	(9,037)	(8.4%)	195,691	213,280	(17,589)	(8.2%)
Expenses	89,072	97,570	(8,498)	(8.7%)	181,838	194,887	(13,049)	(6.7%)
EBITDA	9,459	9,998	(539)	(5.4%)	13,853	18,393	(4,540)	(24.7%)
	9.6%	9.3%			7.1%	8.6%
Forwarding Services:
Revenue	62,084	59,967	2,117	3.5%	126,594	118,243	8,351	7.1%
Expenses	55,542	54,136	1,406	2.6%	115,108	107,585	7,523	7.0%
EBITDA	6,542	5,831	711	12.2%	11,486	10,658	828	7.8%
	10.5%	9.7%			9.1%	9.0%

EUR thousand	30.6.2020	31.12.2019	Change	%
Non-current assets	393,214	355,712	37,502	10.5%
Fixed assets	301,617	292,470	9,147	3.1%
Right-of-use assets	67,583	44,486	23,097	-
Other non-current assets	24,014	18,756	5,258	28.0%
Current assets	147,388	168,802	(21,414)	(12.7%)
Vessels held for sale	0	14,907	(14,907)	-
Assets	540,602	524,514	16,088	3.1%
Equity	222,408	230,868	(8,460)	(3.7%)
Non-current liabilities	215,569	191,927	23,642	12.3%
Current liabilities	102,625	101,719	906	0.9%
Liabilities	318,194	293,646	24,548	8.4%
Equity and liabilities	540,602	524,514	16,088	3.1%
Key ratios	30.6.2020	31.12.2019
Tangible assets / Total assets	88.0%	87.4%
Equity ratio	41.1%	44.0%
Net debt / LTM-EBITDA	3.54	3.03
- excl. operational leases	3.30	2.99

Lease liabilities increasing the balance sheet but partially offset by delivery of sold vessels

BALANCE SHEET

• Fixed assets increase with Dettifoss being delivered to Eimskip
• Right of use assets increase
  • Tromsøterminalen in Norway started operation in January 2020 on long term lease
• Five sold vessels delivered to new owners
• Equity ratio 41.4% compared to 44.0% at year end 2019
• Net debt excluding operational lease liabilities was EUR 142.1m compared with EUR 147.7m at year-end
• Leverage ratio above long-term target partly due to vessel funding and new leases with return not reflected yet in EBITDA

6M

Equity ratio above long-term 40% target – leverage ratio above long-term target of 2-3x EBITDA due to recent investments

NET DEBT, EQUITY AND LEVERAGE RATIOS

*2018 not including IFRS 16 effects

Investments in 2020 primarily related to vessel investments – Dettifoss and Brúarfoss

DEVELOPMENT IN CAPEX

• Maintenance CAPEX EUR 5.4m or slightly lower than budget and last year as management intentions due to COVID-19
• Approximately third of planned maintenance CAPEX, EUR 5.0m, were put on hold due to COVID-19 to preserve financial strength of the Company
• Investments EUR 20.4m on budget
  • EUR 18.5m in the vessels Dettifoss and Brúarfoss
  • Investments for the year 2020 will be close to budget

6M

Strong cash flow generation during the second quarter

CASH FLOW

• Investment in Dettifoss finalized during the quarter
• Excess cash used to pay down revolver facility
• Additional EUR 10m of revolving liquidity facility secured
• Current cash status is good, at approx. EUR 20m with head-room (cash and undrawn revolving facilities) in excess of EUR 50m
  • Net proceeds of approx. EUR 6m on delivery of Brúarfoss in Q4

Q2

• Net investments include investment in Dettifoss and divestment of reefer and container vessels

6M

Million EUR	Q2 2020	Q2 2019	6M 2020	6M 2019
EBITDA	16.0	15.8	25.3	29.1
Working capital changes & EBITDA adjustments	12.7	11.5	7.1	13.0
Paid taxes	(0.6)	(0.4)	(1.3)	(0.9)
Maintenance CAPEX net of sale	(1.5)	(1.7)	(4.8)	(5.5)
Cash flow before debt/lease service	26.6	25.2	26.4	35.7
Debt and lease repayment and interests	(7.9)	(6.7)	(16.1)	(12.7)
Cash flow before Investments	18.8	18.6	10.3	23.0
Net investments	(19.0)	(10.6)	(10.9)	(14.7)
Debt funding	24.7	5.5	24.7	9.7
Pre-payments on revolver facility	(14.0)	0.0	(14.0)	0.0
Dividend to minority	(0.2)	(0.0)	(0.8)	(0.2)
Share buy-back	0.0	(1.6)	(1.5)	(1.6)
Change in Cash	5.5	1.5	3.0	5.8

MANAGEMENT ASSESSMENT OF PERFORMANCE AND STATUS

• Overall acceptable results in a challenging environment
• Streamlining measures resulting in lower cost and improved profitability
• Generally strong performance of International division especially in reefer forwarding
• Container sailing system capacity adjusted, partly offsetting lower volume and revenue

• Valuable contribution from employees during challenging times in securing customer service and the logistic chain

• Export from Iceland has been strong and import on level with last year

• Volume picking up in Faroe Islands in August and outlook for September promising
• Challenging environment for Trans-Atlantic services due to COVID-19
• Improving profitability of container sailing system is a high priority project
• Domestic Iceland with a good start and better than expected
• International division on track
• Strong cash head-room
• Cost benefit of FTE reduction in 1H 2020 being realized in 2H and sustainability of streamlining measures secured
• Re-adjustment of the container sailing system
  • Estimated delivery of Brúarfoss in early Q4 and into schedule later that quarter
  • Continued focus on improving profitability of container sailing system
• Effects of COVID-19 remain uncertain and likely to have negative effect on demand for cargo services throughout the year however, reefer cargo likely to be relatively less impacted than dry

PUBLISHED QUARTER CURRENT QUARTER NEAR TERM OUTLOOK

THANK YOU

APPENDIX I

OPERATING RESULTS BY QUARTER

OPERATING RESULTS	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019
Revenue	160,615	161,670	175,549	172,522	167,535
Expenses	144,614	152,332	164,363	152,210	151,706
EBITDA	16,001	9,338	11,186	20,312	15,829
EBIT	5,035	(1,594)	(3,319)	9,248	5,124
Net earnings (loss) earnings for the period	2,455	(4,951)	(6,449)	7,203	2,754
EBITDA ratio	10.0%	5.8%	6.4%	11.8%	9.4%
EBIT ratio	3.1%	(1.0%)	(1.9%)	5.4%	3.1%
BALANCE SHEET	30.06.2020	31.03.2020	31.12.2019	30.09.2019	30.06.2019
Assets	540,602	524,681	524,514	522,507	520,227
Equity	222,408	217,014	230,868	233,119	232,972
Liabilities	318,194	307,667	293,646	289,388	287,255
Interest-bearing debt	229,917	221,860	204,263	189,207	189,207
Net debt	201,457	197,366	183,526	162,523	170,761
Equity ratio	41.1%	44.0%	44.0%	44.6%	44.8%
CASH FLOW	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019
Net cash from operating activities	21,965	1,249	16,903	1,406	19,872
Net cash (used in) provided by investing activities	(20,470)	4,737	(5,827)	(10,569)	(12,290)
Net cash provided by (used in) financing activities	4,033	(8,506)	(8,903)	311	(6,091)
Cash and cash equivalents at the end of the periodlyear	23,904	18,563	20,737	18,673	26,973

Slow first quarter affecting six-month YoY EBITDA

EBITDA BRIDGE 6M

EBITDA BRIDGE BY BUSINESS ACTIVITY EBITDA BRIDGE BY OPERATING ITEMS

20.8.2020

SHAREHOLDERS LIST

Shareholder	Country	Shares	%
Samherji Holding ehf.	Iceland	50,600,000	27.06%
Lífeyrissjóður verslunarmanna	Iceland	27,485,070	14.70%
Gildi - lífeyrissjóður	Iceland	25,116,139	13.43%
Lífeyrissj.starfsm.rík. A-deild	Iceland	12,750,000	6.82%
Birta lífeyrissjóður	Iceland	11,403,215	6.10%
Stapi lífeyrissjóður	Iceland	9,331,897	4.99%
Global Macro Absolute Return Ad	USA	7,866,970	4.21%
Arion banki hf.	Iceland	5,820,000	3.11%
Lífeyrissj.starfsm.rík. B-deild	Iceland	4,013,700	2.15%
Global Macro Portfolio	USA	3,639,045	1.95%
Almenni lífeyrissjóðurinn	Iceland	3,611,558	1.93%
Söfnunarsjóður lífeyrisréttinda	Iceland	3,302,823	1.77%
Lífeyrissjóður Vestmannaeyja	Iceland	1,297,800	0.69%
Sjóvá-Almennar tryggingar hf.	Iceland	1,235,653	0.66%
Lífsverk lífeyrissjóður	Iceland	968,500	0.52%
ÍV Stokkur	Iceland	695,672	0.37%
Vörður tryggingar hf.	Iceland	604,075	0.32%
Lífeyrissjóður starfsm Akureyrb	Iceland	454,668	0.24%
Íslandsbanki hf.	Iceland	438,836	0.23%
Fles ehf.	Iceland	387,180	0.21%
Top 20 shareholders		171,022,801	91.46%
Other shareholders		9,844,442	5.26%
Total outstanding shares		180,867,243	96.72%
Treasury shares		6,132,757	3.28%
Total shares		187,000,000	100.00%

OTHER MATTERS

• Eimskip's market capitalization was EUR 149.1 million or ISK 24.3 billion at the end of trading on 27 August 2020.
• Closing price at year end 2019 was ISK 189.5 per share and the average closing price for the year 2019 was ISK 183.9 per share. The closing price on 27 August 2020 was ISK 134.5 per share, a decrease of 29.0% from the beginning of the year.
• The total number of shares is 187,000,000, thereof 180,867,243 shares are outstanding and 6,132,757 are treasury shares. There were 664 shareholders at year end 2019 and they were 738 on 27 August 2020.

• The Company submitted objections to statement of objections II from the Icelandic Competition Authority on 15 June 2020.

SHAREHOLDERS

OTHER

DISCLAIMER

Information contained in this presentation is based on sources that Eimskipafélag Íslands hf. ("Eimskip" or the "Company") considers reliable at each time. Its accuracy or completeness can however not be guaranteed.

Copyright of information contained in this presentation is owned by Eimskip. This presentation, including information contained therein, may not be copied, reproduced or distributed in any manner, neither wholly nor partly.

This presentation is solely for information purposes and is not intended to form part of or be the basis of any decision making by its recipients. Nothing in this presentation should be construed as a promise or recommendation. Eimskip is not obliged to provide recipients of this presentation any further information on the Company or to make amendments or changes to this publication should inaccuracies or errors be discovered or opinions or information change.

Statements contained in this presentation that refer to the Company's estimated or anticipated future results or future activities are forward-looking statements which reflect the Company's current analysis of existing trends, information and plans. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially depending on factors such as the availability of resources, the timing and effect of regulatory actions and other factors. Eimskip undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this presentation. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. All forward-looking statements are qualified in their entirety by this cautionary statement.

By the receipt of this presentation the recipient acknowledges and accepts the aforesaid disclaimer and restrictions.