Annual Report 2022

After two years of unprecedented circumstances, the operational environment finally returned to a more normal stage. We were able to meet both employees and customers in person again. Employees returned to the workplace and recreated the invaluable circumstances and moments that only face-to face-relationships can bring. We were, at last, able to celebrate and hold the annual ball in Iceland and other employee events in Eimskip worldwide. We enjoyed inviting customers to events again, and the Seafood Show in Barcelona was a three-day continuous celebration of business and reunited relationships with friends, business partners, and customers. Not to mention the famous Eimskip event where more than 400 customers came together for an evening of good conversation and fun. I had the opportunity to travel to some of our international offices, meet with employees, and get to know Eimskip’s operation even better, which has been invaluable for me in my new role as Chairman of the Board. Understanding and seeing the operation firsthand – at the warehouses, at the terminal areas, and on board the vessels at sea – is both extremely helpful and rewarding.

The external global environment remained favorable for the shipping industry for the greater part of the year, but the operational conditions continued to be demanding. Around the same time that everything was returning to normal after the pandemic, the war in Ukraine broke out. That has, of course, impacted the operation, and again we saw the resourcefulness of Eimskip’s employees in how they managed to meet changes in customers’ needs.

Eimskip delivered strong financial results in 2022, with revenues exceeding EUR 1 billion for the first time, amounting to 1.070 million, and EBITDA amounting to EUR 163 million, an increase of EUR 48.8 million from the previous year. Eimskip is a truly international company, with about 60% of revenues generated outside of Iceland. The Company’s continued strong focus on customer service and operations along with favorable market conditions contributed to the record results. In addition, the Company is, of course, still benefitting from past years’ streamlining measures.

Although performance has been good, we did not have the same growth as the big deep-sea lines, but at the same time, as a niche ocean carrier in the North Atlantic connecting Europe and Scandinavia to the U.S. and Canada via Iceland, we did not expect to see the same contraction as many of them have indicated. Eimskip’s strategic approach in Trans-Atlantic services has been successful and continued to grow during the year. The international forwarding operations also performed well in a highly volatile market, although there was a swift downturn in the latter half of the year. Eimskip is well positioned and prepared to respond if the external environment becomes less favorable than it has been for the past years.

The Board of Directors approved a proposal from the Executive Management Team to payout a special Christmas payment to all employees amounting to a total of EUR 1.5 million. This has now been done for two years in a row, and we are happy to be able to do that as a token of appreciation for the employees’ outstanding contributions and excellent work.

Finally, I want to thank all Eimskip employees, the Executive Management Team, and the Board of Directors for their good contribution and cooperation during the year.

Strong financial results
We delivered record financial results in 2022 driven by emphasis on excellent customer service, operational focus, good volume in key trade lanes and favorable market conditions for the greater part of the year.

Operationally, our environment has been very challenging for an extended period, which has repeatedly tested our ability to adapt and adjust to new conditions. The year 2022 was marked by growing global economic uncertainties, with high inflation and rising geopolitical tension affecting both international trade volume and labor markets worldwide, caused by the aftermath of the COVID-19 pandemic and the consequences of the tragic war in Ukraine. As soon as the war broke out, we suspended sailings to Murmansk in Russia, which affected our Norwegian reefer liner services, and we saw a sharp decline in the flow of pelagic volume into the Baltic. Despite that, most trade lanes in container liners performed well on the back of good demand and successful capacity management. Imports to Iceland remained on a high level throughout the year, not least because of high activity in the Icelandic economy, and our Trans-Atlantic services saw strong growth in volume and revenue.

Our international forwarding benefitted from high global freight rates during the first half of the year, but as the economic slowdown and recessionary pressure progressed worldwide, rates started to soften at the end of Q2 followed by a sharp decline in Q4. The easing of port congestion and availability of space and equipment with Deep-Sea lines had a positive impact on forwarding volume in Q4 compared to previous quarters. However, the decrease in rates resulted in a decline in overall revenue and margins.

As of the second half of the year, growing inflationary pressure coupled with an unprecedent surge in energy prices in Europe started to affect our operating cost, including salaries, bunker expenses, maintenance cost, and cost of third-party services such as terminal charges. Our focus on operational efficiency, continuous performance monitoring, and proactive management has enabled us to countermeasure the cost increases and maintain healthy margins.

Well-positioned niche carrier
Eimskip is well positioned as a niche ocean carrier in the North-Atlantic region servicing export-driven economies who are at the same time highly dependent on import of consumer and infrastructure products. Our niche focus on transportation of frozen and chilled commodities has proven to be very fruitful, as has our strategic approach in the Trans-Atlantic services. The global external environment has been favorable for the transportation industry, although Eimskip’s sailing system is mainly servicing trade lanes that did not follow the same price increases as the major routes and the price levels are more stable. Our niche focus on transportation of chilled and frozen commodities is also supportive in the current global economic situation since demand for foodstuffs is generally more resilient than demand for other goods in a recessionary environment.

Excellent customer service
Eimskip is renowned for its excellent service, where our reliable sailing system plays an important role along with very qualified employees. We have a broad customer base and an experienced global team with local expertise that provides customers with holistic services ranging from e.g. liner to terminal, forwarding, trucking, warehousing and cold storage to custom clearance. A strong focus on information technology and potential synergies between systems and teams plays a vital role in our proactive commitment to service excellence. 

Milestones in energy exchange
Important steps were taken towards energy exchange in 2022 with e.g. shore connections for vessels in Sundahöfn and an LOI with Landsvirkjun, the national power company in Iceland, concerning Eimskip’s energy transition for its shipping- and ground transport fleet. We aim to have good green equipment in our operation and foresee the next renewal of vessels in the near future, as well as other important projects like investment in an automatic gate at Sundahöfn.

The greatest resource
Our employees are the Company’s greatest resource. I am proud of the step we took last spring, when we initiated an international leadership program to develop a diverse group of prospective leaders within our company worldwide. A total of 75 employees from 14 countries graduated from the program in 2022, with an equal gender balance. The program has been a success, with nine participants, thereof five females, already promoted to new roles.

I want to thank our customers and suppliers as well as our shareholders, which I am happy to share have increased by 90 during the year.

I also want to thank our experienced and qualified group of employees worldwide who have again and again proven to be committed and resourceful in the operation and in servicing our customers. Finally, I want to thank the Board of Directors for a good cooperation throughout the year. It is invaluable to work with such a team.

ÓSKAR MAGNÚSSON
CHAIRMAN OF THE BOARD

Óskar Magnússon, Chairman of the Board
Óskar was born in 1954 and lives in Iceland. He is a well-known writer and has published two collections, short stories and four novels in recent years. He is a farmer and co-owner and chairman of Kerfélagið ehf., the owner of the tourist nature attraction Kerid Crater. Óskar has been a board member of Samherji hf. since 1998 and is currently the vice-chairman of the board, as well as a board member of Seley ehf. and board member of several other companies within the Samherji group. He is the chairman of the Icelandic Landowners Association. He has previously been a vice-chairman of the Icelandic Bar Association and served on various boards of retail companies. Óskar was Publisher/CEO and a major shareholder of Árvakur hf. from 2009 to 2015, President/CEO of Tryggingamiðstöðin hf. and TM Life Insurance hf. from 2004 to 2007, President/CEO of Vodafone Iceland from 2001 to 2004, Executive Chairman of Baugur from 1998 to 1999 and President/CEO of Hagkaup hf. supermarkets, that later became part of Baugur Corporation, from 1993 to 1998. Óskar has served on the city council in his community as well as being the parish chairman since 2004. Óskar has been a Supreme Court Attorney since 1993. He graduated with an LL.M. degree in International Business Law from George Washington University Law School in 1986, and with a Cand.jur. degree from the University of Iceland in 1983. He owns 14,349 shares in the Company, but no share options. Óskar was a board member in 2019, an alternate member of the Board from 2020 to 2022 and is currently the Chairman of the Board of Eimskipafélag Íslands, Chairman of the Remuneration Committee and a member of the Nomination Committee. Óskar is not independent of Seley ehf., which holds, in total, 56.7 million shares in the Company, at the year-end 2022.