2017-02-23 20:17:59 CET

2017-02-23 20:17:59 CET


REGULATED INFORMATION

English Islandic
Eimskipafélag Íslands hf. - Financial Statement Release

2016 was a record year for Eimskip


Normalized EBITDA growth 23.7%


  -- Revenue EUR 513.9 million, up by EUR 14.3 million or 2.9% from 2015
     -- Revenue up by EUR 16.3 million or 3.3% when excluding the EUR 2.0
        million gain on disposal of a vessel included in 2015 revenue
  -- EBITDA EUR 53.5 million, up by EUR 8.3 million or 18.3% from 2015
     -- Normalized EBITDA up by EUR 10.3 million or 23.7%, excluding the EUR 2.0
        million gain on disposal
  -- Net earnings EUR 21.9 million, up by EUR 4.1 million or 23.0% from 2015
  -- Equity ratio 62.2% and net debt EUR 41.6 million at year-end
  -- The Board proposes a dividend payment of ISK 6.80 per share, a total of
     approximately EUR 11.0 million
  -- EBITDA forecast for the year 2017 in the range of EUR 57 to 63 million



Gylfi Sigfússon, President and CEO

“I am pleased to say that 2016 was a record year for Eimskip. Overall revenue
increased to EUR 513.9 million, up by 3.3% compared to normalized 2015 revenue.
EBITDA increased to EUR 53.5 million, up by 23.7% compared to normalized EBITDA
of EUR 43.2 million in 2015. Acquisition related costs of EUR 1.1 million were
expensed in 2016. Net earnings for the year were EUR 21.9 million, up by 23.0%.
The company’s cash flow remained strong and net cash from operating activities
grew by EUR 11.3 million or 30.3% from prior year. The North Atlantic liner
services revenue were EUR 380.3 million, up by 6.2%, and EBITDA for the segment
was up by 18.5% and volume in the liner services 2016 grew by 5.9%. Revenues in
forwarding services were EUR 133.6 million, down 5.6%, reflecting lower
international freight rates. However EBITDA was EUR 11.0 million, up by 17.7%
due to tight cost controls and because margins are not affected despite lower
freight rates. Volume in forwarding services was up by 4.8%. 

Revenue in the fourth quarter was EUR 140.5 million, up by EUR 9.9 million or
7.6%, and the quarter’s EBITDA was EUR 9.9 million, up by 1.6% compared to
2015. Liner services revenue was EUR 101.7 million, up by EUR 7.0 million or
7.4%, but the liner services EBITDA was 3.0% lower due to EUR 0.8 million of
acquisition costs and lower earnings in Norway in the quarter. Norway had an
overall record year in 2016 in revenues and EBITDA, but were lower in the
fourth quarter compared to the previous year. We anticipate that Norway will
continue to grow both in revenue and EBITDA in 2017. Transported volume in the
liner services was flat due to volume decrease in Norway. Forwarding revenue
was EUR 38.8 million, up EUR 2.8 million or 7.9% compared to prior year, mainly
due to the acquisition of Extraco. EBITDA for forwarding was EUR 2.1 million,
up by 23.2%, reflecting higher freight rates and volume growth of 9.3% in the
quarter. 

In May 2016, Eimskip and Royal Arctic Line in Greenland signed a letter of
intent to form and evaluate a potential cooperation regarding building of three
container vessels and sharing capacity. The two companies signed an agreement
for the cooperation in January, subject to notification to and confirmation
from the relevant competition authorities if applicable. At the same time,
Eimskip signed a contract with a shipyard in China on building two 2,150 TEU
ice class Polar Code container vessels. These vessels will be built in line
with environmental standards, and are designed to be fuel efficient. The
contract price of each vessel is approximately USD 32 million and the vessels
are expected to be delivered in 2019. Royal Arctic Line also signed a contract
to build one similar vessel with the same shipyard. 

Eimskip acquired 90% of the forwarding company Extraco in Rotterdam in October
2016. In January, Eimskip announced the acquisition of an 80% share in Mareco,
headquartered in Antwerp, Belgium. The companies specialize in reefer freight
forwarding services. The total investment for the two companies was
approximately EUR 29 million, with estimated annual revenue of EUR 80 million
and EBITDA margins of about 6-8%. These two acquisitions are very strategic,
both operate in our existing markets, each has a clear niche and will provide
additional benefits to our existing forwarding services. Eimskip intends to
continue to grow in the forwarding business and we welcome Extraco and Mareco
into the Eimskip group. With access to the group and greater resources, we will
create synergies and expand the services to our customers. Each forwarding
company brings specialized expertise to our forwarding group and best practices
can be shared. These asset-light companies add a great balance and
diversification to our business. These accretive acquisitions will provide
excellent growth in earnings and free cash. We are actively looking to acquire
additional freight forwarding logistics companies. 

Eimskip signed an agreement to acquire the Norwegian shipping and logistics
company Nor Lines in November 2016, subject to the approval of the Norwegian
Competition Authority (NCA). On 20 February, NCA gave a notice of an objection
to Eimskip’s acquisition of Nor Lines. Eimskip has 15 business days to present
its counter-arguments and following that the NCA has another 15 business days
to make a final decision. Eimskip intends to submit its counter-arguments after
evaluating the NCA objections. 

In relation to Eimskip’s investment and acquisition projects, the company has
made an agreement with Íslandsbanki for a revolving credit facility with an
agreed term of 18 months in the amount of EUR 47 million. The company is
evaluating several attractive long-term financing proposals for the vessels. 

Changes will be made to the company’s sailing system by the end of February to
further strengthen the system and its services. With the changes and an
additional 700 TEU vessel, the company’s capacity to and from Europe and
North-America will grow by 7-11%. A new route, the Red Line, will be added and
the services of the Green Line and the Gray Line will be changed. Weekly
coastal services will be offered to support the increasing activities in
Iceland. In the beginning of May, the port of Helsingborg will replace Halmstad
as the company’s port of call in Sweden. This change will better serve our
customers. 

Eimskip has sold its container vessel Brúarfoss, built in 1992, and has
purchased a 700 TEU container vessel Sophia, built in 2008, which will be
delivered in May.  We are continuing to upgrade and renew our fleet to better
serve our customers and ensure our reliable services. We are going to continue
to take advantage of the depressed shipping market and our strong financial
condition to purchase attractively priced used vessels. Following the vessel
changes, Eimskip will be operating a fleet of 21 vessels. 

Eimskip’s intention is to grow organically and through strategic accretive
acquisitions to increase shareholder value and the company continues to
evaluate additional acquisitions and vessel investments on an ongoing basis. No
new equity will be issued to conclude potential investments, but additional
debt will be issued whilst still maintaining a strong balance sheet. 

The Board of Directors proposes to increase its dividend from ISK 6.50 per
share to ISK 6.80 per share, or up by 4.6% in ISK, amounting to ISK 1,269.1
million. In terms of EUR, the dividend increases from EUR 8.6 million to
approximately EUR 11.0 million or up by 27.7%, reflecting the strengthening of
the ISK. 

The outlook for the year 2017 is positive and the company expects growth in
imported volume to Iceland. The outlook for the Faroe Islands and Norway is
also positive. The forwarding business is expected to grow in volume, revenue
and margins in 2017, among other due to the new acquired companies and expected
increasing international freight rates. Extraco and Mareco will create
synergies for Eimskip into new commodities and trade lanes. Competition remains
strong in the market area, especially in the company’s North Atlantic liner
operation. The strike in the seafood industry in Iceland in January and
February will negatively affect the first quarter’s results. We assume that the
quota for the year will be fully caught and that the cargo will therefore
switch from the first to the second quarter and that it will be transported
during the remainder of the year. Increased imports to Iceland will partly
compensate for less export of fish in the first quarter. The forecasted EBITDA
for 2017 is in the range of EUR 57 to 63 million.” 



Further information

  -- Gylfi Sigfússon, President and CEO, tel.: +354 525 7202
  -- Hilmar Pétur Valgardsson, CFO,  tel.: +354 525 7202
  -- Erna Eiríksdóttir, Senior Manager of Investor Relations, tel.: +354 825
     7220,
email: investors@eimskip.is