Eimskip: Bleak outlook for 2011
The Icelandic shipping company Eimskip said it had first quarter net profit of 5.8 million euros ($8.3 million) compared to 1.3 million euro in the same 2010 period, but the company’s president said he was not optimistic about the outlook for the remainder of the year.
Revenue was 90.2 million euros ($128.7 million) for the first 2011 quarter compared to 79 million euros in the first quarter of 2010.
Eimskip's total liner transport volume in the first quarter decreased 3 percent, but its international reefer forwarding services increased 7 percent.
The company said profit was above expectations due to better collections of an outstanding loan that had previously been fully written off. It said profit from regular operations, on the other hand, was below expectations, largely due to the cost from the grounding of a ship Godafoss off the coast of Norway in mid-February, and the decrease in liner transport volume.
The Godafoss grounding is one of Eimskip's largest insurance claims in recent years, although the company is thoroughly insured to meet such setbacks. In spite of that, Eimskip said it will have a direct cost of around 500,000 euros from the accident.
Gylfi Sigf'sson, president and chief executive officer, said liner volumes fell in both Iceland and in the Faroe Islands. “The outlook for 2011 does not give much cause for optimism, with no foreseeable increase in transport volume,” he said.
Another Eimskip ship, Reykjafoss, ran aground in the port of Argentia, Newfoundland, last month, but the company said expenses will have “minimal effect” on second quarter earnings.
“It appears that we are facing another recession period in transport volume in the North Atlantic, since the economy continues to stall despite our hopes of the opposite. Eimskip's customers in Iceland are also facing decrease in income and adversity in financing their inventories. The recent salary agreements between Icelandic Workers Unions and the Employers Association will also affect the operational results of Icelandic companies and no large scale projects are due to start in Iceland,” Sigf'sson said.
Eimskip has operations in 16 countries, with 19 vessels and around 1,250 employees, 730 in Iceland.