Highlights of Q2 2019 results
Highlights of 6M 2019 results
VILHELM MÁR ÞORSTEINSSON, CEO
“Eimskips’ performance was in line with expectations for the first six months of 2019. However, revenues and EBITDA in Q2 were slightly below expectations, primarily as a result of lower container liner volume to and from Iceland and the Faroe’s.
Our diversified International operation saw a good first six months with better results than same period 2018. Operations in Norway continued to improve because of various restructuring measures despite less reefer liner volume as the company reduced the capacity by two vessels between periods. Volume in Trans-Atlantic services continued to grow which positively affected the North-America operation. Export volume from Faroe Islands declined in second quarter due to lower ground fish catch and different pelagic product mix. The forwarding volume decreased in Q2 compared to same period last year, however it did not affect the results due to improved margins.
Following a good first quarter in Container liner services, operating results in second quarter were affected by lower level of volume in import to Iceland due to cool down in the Icelandic economy. In addition, after strong export volumes in the first five months of the year, volume declined materially in June and July but has started to pick up again in mid-August. The decline in export volume is mainly explained by the effect of no capelin season as seafood companies turned increasingly to other species until quota limits were reached earlier than last year. Furthermore, mackerel volumes from Greenland, discharged in Iceland for export were substantially lower than Q2 last year. Domestic services in Iceland such as trucking and warehousing were negatively affected by the lower volume in Q2.
We currently have the container sailing system under review to adjust for the lower volume levels with the aim of lowering fixed operating costs, secure high customer service level and to pave the way for the Royal Arctic Line cooperation. The goal is to present adjusted sailing system later this year, the work is well under way and we are confident that we will continue to operate the best sailing system to and from Iceland and the Faroe’s. We expect the new vessels to be delivered in Q4, slightly later than previously expected and the co-operation with Royal Arctic Line to commence in Q1 2020.
For the last months we have worked on various projects with the aim of streamlining the operation, improving profitability and increasing productivity. Integration of TVG-Zimsen was completed in Q2 and we are starting to see the benefits in Q3. I am pleased to see that the cost cutting measures in the head office divisions executed in Q1 started to materialize in Q2.
Eimskip’s management has strong focus on cash generation and I am pleased to see that cashflow from operation increase substantially in the first six months compared to same period last year. We are currently working on a target future capital structure for the Company along with a 3-year maintenance CAPEX plan and hope to present that later this year.
A decision has been made to evaluate a potential divestment of Seatours (Sæferðir), Eimskip’s subsidiary in sea related tourism. We expect to have a decision on this matter in the next few months.
The Board of Directors has approved to work towards consolidating Eimskip’s headquarters in the office facility in the warehouse Vöruhótel and to implement activity-based work environment. In relation to this project we expect to reduce office space in the Sundahöfn terminal area by approx. 50% resulting in positive financial benefits. This is in line with management’s strategy of increasing profitability of core operation and I am looking forward to a more dynamic work environment which will increase collaboration, shorten lines of communication and meet our employees needs of more modernized workplace.”