GYLFI SIGFÚSSON, PRESIDENT AND CEO
“The third quarter 2018 was the company’s largest quarter in terms of revenue since 2009, however the EBITDA results for third quarter 2018 are below our expectations. The main reasons for lower EBIDTA in the quarter relate to EUR 1.7 million lower results in the operation in Norway as transported volume decreased and breakdown of reefer vessels had a negative impact on the results. In addition, the results from the freight forwarding segment was EUR 1.4 million lower compared to previous year.
There are four main reasons for the decrease in EBITDA in the first nine months 2018. Firstly, it relates to lower results in Norway as previously stated. Secondly, at the end of last year the company added on a third vessel on its North American route, to fulfill the weekly service goal to support the Trans-Atlantic and Short-Sea trade. The growth in volume and revenues realized much slower than we anticipated but in recent weeks, we have seen increased bookings and we anticipate seeing the growth turning into positive margins. We are also putting more focus on sales in the Trans-Atlantic and Short-Sea trade. Thirdly, the trade tension and the consolidation of the big shipping lines is affecting our freight forwarding business. In addition, the company faced a loss of agency services for a shipping line in Europe, which negatively affected the third quarter results. Going forward, we expect freight forwarding to gain strength and the turbulence around the mergers and consolidation with the deep-sea lines is getting back to normal. Finally, a decrease in imports of vehicles and equipment to Iceland has negatively affected our results but exports from Iceland has been growing.
The company expects to realize gains from a number of short-term initiatives to improve the operation and its profitability going forward. We have off-hired one vessel in Norway and we are evaluating a restructuring of the vessel fleet and adapting the business to changes in the Norwegian market. We are working on fine-tuning the container sailing system, with more favorable terminal contracts. We are also working on lowering both our container cost and charter agreements for vessels. Reduction in salary cost is under evaluation, through more automation and back-office setup and through further lay-offs. We are implementing a new platform for our freight forwarding business that will connect our offices through the same system, which will increase operational and sales synergies between the offices. The emphasis of proactive sales in the Trans-Atlantic and Short-Sea business is an ongoing task.
It is positive to see the volume growth in the third quarter in Eimskip’s liner segment, driven by 6.2% growth in container liner volume in relation to the Trans-Atlantic trade and exports from Iceland.
The forwarding sector has been going through some difficulties that relates to turbulence around the mergers of the big shipping lines and their alliances. Forwarding has also been affected by the trade tensions in most of the markets but still the volume growth is around 5.5% mainly driven by dry cargo.
The new building program of the two specialized 2,150 TEUs container vessels is proceeding with estimated delivery in the second half of 2019. The Icelandic Competition Authority is evaluating the intended co-operation with Royal Arctic Line.
The EBITDA guidance for the year 2018 was changed on 26 September and is EUR 49 to 53 million.”