Hf. Eimskipafélag Íslands - Company Announcement

- HF Eimskipafelag Islands issues a profit warning - The Group‘s capital will become negative due to write-offs

Last December, Eimskip issued a profit warning due to an anticipated goodwill
and asset write-offs in the fourth quarter. It was reported that the impairment
review was yet to be completed and that the impairment would be booked in the
fourth quarter. 

Following the completion of the impairment review which was carried out as part
of the annual audit process the value of this write down of goodwill has been
confirmed. In addition, other assets have been re-valued and their value
written down in the Group's books. 

Eimskip's goodwill has increased significantly in recent years as a result of
investments in other companies. In accordance with international accounting
standards, an impairment review has been conducted on, amongst other things,
the Group's goodwill, and in light of the current market conditions and with
prudence in mind, the Group has partially written down the goodwill. As a
result Eimskip expects to report negative equity of up to €150m as at 31
October 2008. 

Financial re-organization
In recent months Eimskip has been working with domestic and foreign advisors to
on financially re-organize itself. Eimskip has already reached an agreement
with a majority of the bondholders to delay interest payments and amortization.
Additionally, the Group has reached an agreement with a number of other
domestic and international lenders regarding delays in interest payments and
amortization. Eimskip is in discussion with other lenders, who remain broadly
supportive. 

It is estimated that the sale of assets in North-America will be finalized in
February 2009, easing the leverage of the Group. The final sales value remains
uncertain. 

Following the sale of Eimskip's assets in North-America, further discussions
with creditors regarding the financial re-organization will commence. The Group
plans to make proposals regarding the financial re-organization to the
creditors once the disposal of North American assets have been completed.  The
Group continues to have regular dialogue with its financial creditors. 


Eimskip's core business is stable

Despite the challenging debt position and the difficult situation in the
financial markets, Eimskip's core business is healthy. The response made by the
Group to the reduction in Icelandic import volumes has worked well. 

Eimskip's cash flow is adequate and the core business, the transport sector, is
running well. The Group will continue to supply its customers with a solid and
good service. In spite of the current economic situation in Iceland, Eimskip
has managed to ensure its cash position and daily operations. 

For further information: Gylfi Sigfússon, CEO´s Hf. Eimskipafélag Íslands.