Introduction
Eimskip’s operations are divided into two principal market segments: Liner services in the North Atlantic and international forwarding services.
LINER SERVICES
- The core of the Company’s operations
- Eimskip’s home market includes Newfoundland and Labrador, Iceland, the Faroe Islands, and Norway
- 17 vessels in operation
- Terminal operations
- Chilled and cold storage facilities
- Warehousing
- Trucking and distribution
- Air freight services
- Agency services
FORWARDING SERVICES
- Main focus on reefer forwarding; dry cargo forwarding is growing
- Efficient system based on a network of 56 own offices in 18 countries across four continents
- Cooperation between Eimskip’s own offices, its worldwide network of associates, and international deep-sea lines
In 2019, 63.7% of Eimskip’s revenue came from liner services and 36.3% from forwarding services. The division of EBITDA in 2019 was as follows: 65.5% from liner services and 34.5% from forwarding services. The geographical division of revenue was showed a decreasing share of Iceland unchanged in 2018 where Iceland related business contributed 45.3% of total revenue.
REVENUE BY BUSINESS SEGMENT
EBITDA BY BUSINESS SEGMENT
DEVELOPMENT OF EBITDA BY BUSINESS SEGMENT
EUR million
* As at 1 January 2019, IFRS 16 was implemented. EBITDA adjusted for IFRS 16 is EUR 49.4 million.
GEOGRAPHICAL SPLIT OF REVENUE
LINER SERVICES
Eimskip’s liner services are the core of the Company’s operations. Liner services operate a dynamic sailing system in the North Atlantic, with 17 vessels currently in operation. The Company’s home market includes Newfoundland and Labrador, Iceland, the Faroe Islands and Norway. The liner services also offer short-sea services in Europe and North America, transatlantic services, and bulk transport. Liner services include terminal operations, chilled and cold storage facilities, warehousing, trucking and distribution, airfreight services, and agency services.
KEY STATISTICS
The revenue for liner services in 2019 amounted to EUR 432.7 million; a decrease of 3.7% from 2018. The EBITDA from the liner services amounted to EUR 39.7 million but excluding the effect of IFRS 16, EBITDA amounted EUR 33.3 million compared to EUR 35.0 million in the previous year. In 2018, liner services accounted for 63.7% of the Company’s revenue and 65.5% of its EBITDA.
Transported volume in Eimskip’s liner services in 2019 decreased by 4.9% from the previous year. The main reason for the decrease was the cool-down of the Icelandic economy, which resulted in a 10.7% lower import volume. Export volume from Iceland was on level with the previous year, despite the loss of the capelin season and considerably lower total catch during the last quarter of 2019. On the positive side, transatlantic services grew by double digit numbers.
The graph below shows the volume development from 2015 to 2019.
VOLUME DEVELOPMENT IN LINER SERVICES
Changes from previous year
LINER SERVICES VOLUME 2019
Iceland, Faroe Islands, Norway and Trans-Atlantic
Home Market
Eimskip has defined its home market as the North Atlantic, from the east coast of North America to the west and north coasts of Norway, including Newfoundland and Labrador, Iceland, The Faroe Islands, and Norway. These countries are all niche market areas, rich in natural resources, and have small populations.
Seafood represents a substantial part of the total cargo in the Company’s home market.
Sailing System
Eimskip constantly re-evaluates its sailing system and vessel fleet with the aim of optimizing its operational efficiency.
In mid-October last year, Eimskip made changes to the Company’s container sailing system to increase the service level and lower fixed operating costs. These changes were an important milestone in the Company’s journey to improve profitability and strengthen core operations. Furthermore, the changes pave the way for the Royal Arctic Line (RAL) cooperation, scheduled to commence in Q2 2020. With the new system, the Company simplified the European and Scandinavian sailing routes, thus enabling the Company to offer both one day later departures and shorter transit times from Rotterdam and Aarhus to Iceland. Eimskip will continue to provide express services for the export and import of fresh products to and from Iceland and the Faroe Islands.
With these changes, the Company reduced the number of vessels on European routes by one. At the same time, Eimskip started operating larger vessels, thereby maintaining similar capacity at a lower unit cost. Recent investments in the port of Sundahöfn with an extended container terminal, a new gantry crane, and a larger quay enabled larger and more efficient vessels to be in operation.
PARTNERSHIP BETWEEN EIMSKIP AND UNIFEEDER
In 2019, Eimskip started a partnership with Unifeeder, one of the biggest short sea shipping companies in Europe. Unifeeder offers connections to the Baltic region from Iceland, The Faroe Island and Denmark with weekly connections to and from Gdynia and Szczecin in Poland, and Klaipeda in Lithuania. The cooperation enables the Company to meet the increasing interest from customers in the area, and offer more frequent sailings and more ports.
SAILING ROUTES
The Blue Line offers express services for both import and export between Reykjavík and Rotterdam. With fast sailing times, this route is ideal for fresh fish, fruits, vegetables, and other perishable products. The vessels serving on the Blue Line are Viona and Vera D.
The Yellow Line offers express services, e.g. for fresh fish, from Iceland and the Faroe Island to the UK and continental Europe, with a bi-weekly Iceland coastal service. The vessels serving on the Yellow Line are Lagarfoss and Selfoss.
The Red Line offers weekly services to and from all major ports in Scandinavia with larger vessels and more reliable connections. A Friday departure from Aarhus to the Faroe Islands and Iceland enables the best connections from Europe. The Red Line is ready for the cooperation with the Greenlandic shipping company Royal Arctic Line, starting in 2020. The vessels serving on the Red Line are Godafoss and Laxfoss.
The Green Line offers weekly services from Iceland to the east coast of the United States, Nova Scotia, Newfoundland, and Labrador and then back to Iceland. The Green Line connects to the other European Lines in Reykjavík, enabling transatlantic services. The vessels Skogafoss, EF Ava, and Pictor J serve on the Green Line.
The Purple Line offers weekly services between the Faroe Islands, Scotland, and England. The Purple Line plays an important role in serving the salmon industry in the Faroe Islands. The vessel serving on the Purple Line is Vantage.
The Orange Line offers weekly services from Murmansk in Russia, down along the Norwegian coast, and onwards to the Netherlands, England, and Scotland before returning to Norway. The vessels serving on the Orange Line are Svartfoss, Polfoss and Holmfoss.
Four vessels serve ‘Other Operations’ in the North Atlantic. Eimskip’s reefer transportation services are specially focused on the transportation of frozen or chilled seafood and other perishable products in bulk, directly from port to port, in whole or partial loads. These services are carried out by the specialized reefer vessel Silver Bird. Eimskip offers specialized transport for bulk cargo in whole loads, or by the needs of the shipper and the consignee each time. The vessel Saxum is used in bulk transport. Finally, the ferries Baldur and Særún serve on the west coast of Iceland.
SAILING SYSTEM IN THE NORTH ATLANTIC
FLEET
Eimskip currently operates seventeen vessels in the North Atlantic, of which seven are owned vessels and ten are chartered. Thirteen of the vessels are used in scheduled liner services on six different sailing routes. Ten are container vessels and three are reefer vessels. In addition, one reefer vessel offers spot services, one is in bulk services, and two are ferries operated in Iceland.
The vessels are highly competitive in terms of their size, cranes, reefer plugs, shallow draft, and maneuvering capabilities to enter narrow ports.
Eimskip took important steps in vessel fleet renewal late in 2019, when the Company sold the reefer vessels Langfoss, Vidfoss and Stigfoss and the container vessels Laxfoss and Godafoss.
Eimskip operated six reefer vessels but following the sale it operates four, of which three are owned by Eimskip. This decrease in number of vessels does not affect the liner services in Norway, although capacity will be reduced in the spot services. The operation of these vessels has been challenging in recent years and the operating results of the spot services has been unacceptable. The sale of these vessels is a part of continued streamlining and integration measures in Norway and is in line with the Company’s aim of improving profitability.
The 1,457 TEU container vessels Godafoss and Laxfoss are 24 years old and had been operated by Eimskip for nearly 20 years. Eimskip made an agreement with the buyer, parallel to the sale, to charter the vessels back. Godafoss and Laxfoss will continue to service the Red Line, to and from Scandinavia, until the new vessels currently under construction will be delivered and the cooperation with the Greenlandic carrier Royal Arctic Line can commence. That is expected in Q2 2020. The sale did not affect service to customers or the Company’s sailing system.
COOPERATION WITH ROYAL ARCTIC LINE
In January 2017, Eimskip and Royal Arctic Line, the national carrier of Greenland, signed a cooperation agreement regarding potential sharing of capacity. The cooperation, which was confirmed by the Icelandic Competition Authority in 2019, is scheduled to commence in Q2 2020.
Two new 2,150 TEU ice-class Polar Code container vessels are being built for Eimskip in Guangzhou in China, with expected delivery in Q2 and Q3 2020. The vessels are in line with environmental standards and designed to be fuel efficient. Initially, the delivery of the vessels was planned in 2019 but has been delayed due to technical issues and the COVID-19 outbreak.
VESSEL FLEET
Viona
Vera D
Lagarfoss
Selfoss
Godafoss
Laxfoss
Vantage
Skogafoss
EF Ava
Pictor J
Silver Bird
Holmfoss
Polfoss
Svartfoss
Saxum
Baldur
Saerun
OPERATIONS AND OPERATING ASSETS
The Company operates terminals in 16 locations in five countries: seven in Iceland, three in the Faroe Islands, three in Norway, two in Canada, and one in the USA. Eimskip owns or operates 15 chilled and cold storage facilities in five countries: five in Iceland, three in Norway, two each in the Faroe Islands, Newfoundland and Labrador, and one in China. Eimskip also operates 27 warehouses for dry cargo in nine countries: 12 in Iceland; five in the USA; three in the Faroe Islands; two in the UK; and one each in Norway, Sweden, Denmark, the Netherlands, and Vietnam.
The Company’s container fleet currently consists of around 28,800 TEU. Trucking and distribution services are operated in Iceland, the Faroe Islands, Denmark, the Netherlands, and the USA. The Company operates 380 container cranes and forklifts; and 774 trucks, vans and trailers.
OPERATIONS AND OPERATING ASSETS
FORWARDING SERVICES
Eimskip is a niche player in forwarding services specializing in reefer forwarding.
Over the years, Eimskip has built valuable relationships and acquired extensive know-how in the reefer forwarding trade, both through its operations and the acquisition of specialized forwarding companies. Eimskip focuses on selling forwarding services by utilizing its global network of the Company’s own offices, international deep-sea lines, and its associates. Eimskip is a specialist in the transportation of temperature-controlled cargo, where seafood products play an essential role. The Company also offers forwarding of dry cargo through various logistics solutions worldwide.
KEY STATISTICS
Eimskip started its forwarding services in Asia in 2004, when it opened an office in Qingdao, China, starting out with 4,000 TEU. The Company currently operates eight offices in Asia. To compare, the Group’s forwarding services handled about 211,000 TEU in 2019.
In international forwarding services, cargo volume is dependent on seaborne perishable reefer cargo. There, fish products play the most important role. Volume in reefer forwarding is more stable than in dry cargo forwarding. Reefer cargo is less dependent on economic fluctuations, since consumption of food products is usually more stable than other products. Other perishable cargo includes meat, fruit, and vegetables.
Following challenging market conditions for forwarding services in 2018, improvements were implemented in 2019. At the end of 2018 Eimskip discontinued dry forwarding services in Asia, which were high in volume and working capital needs but low in margin. Improvements were also seen in markets related to Africa. Revenue amounted to EUR 246.9 million; an increase of 1.0% from the previous year. The EBITDA from forwarding services was EUR 20.9 million, but EUR 16.0 million excluding the IFRS 16 effect; an increase of EUR 1.8 million or 12.6% from 2018. Forwarding services accounted for 36.6% of the Company’s revenue in 2019 and 34.5% of its EBITDA.
Transported volume in Eimskip’s forwarding services in 2019, including reefer forwarding and dry cargo forwarding, decreased by 7.0% from the previous year. The volume drop was mainly due to the discontinued dry forwarding service in Asia. Despite a lower volume margin, the results improved between years.
The graph below shows the development of volume transported by the Company’s forwarding services, from 2015.
VOLUME DEVELOPMENT IN FORWARDING SERVICES
Changes from previous year
FORWARDING SERVICES VOLUME
Reefer and dry cargo forwarding
GLOBAL NETWORK
