What’s going on here?

Today is the last day of the 2017/2018 quota year in Iceland. In line with the trend for the last years all the TAC for the key species such as Atlantic cod has been used and the harvesters are getting ready for the new quota year starting on September 1st. So, you can say that there are no surprises there. Yet, there are potential clouds building up on the horizon as the signs are there that despite being able to catch all the quota in time the performance of the companies in the industry is lacking as indicated by the information disclosed by companies such as HB Grandi in their latest investors presentation for Q2, 2018. It is clear that a loss of EUR 200.000 for the Q2 2018 and a change in EBITDA of nearly EUR 3,7 million compared to the performance for Q2 2017 is a cause of concern. The company states that the increases in resource rent, increases in maintenance and fishing gear costs, and the higher fuel costs. Even though HB Grandi is the only publicly traded seafood company in Iceland and thereby required to disclose its finances - the situation is likely to be similar for the rest of the industry in Iceland.

What does this mean?

Over the years the exchange rate has been the one of the strongest influence factors in determining the performance in the harvesting and processing sector in Iceland. On that note the strong Icelandic currency in recent years has not been helping this export sector. With the booming tourism industry, the external trade and service balance in Iceland has been positive since Q1, 2014 - contributing to the strengthening of the Icelandic currency. How this situation will last remains to be seen - prolonging the difficulties for the export sectors, including the seafood sector, in Iceland.

Why should I care?

For you, personally:

Over the years the exchange rate has been the one of the strongest influence factors in determining the performance in the harvesting and processing sector in Iceland. On that note the strong Icelandic currency in recent years has not been helping this export sector. With the booming tourism industry in Iceland the external trade and service balance has been positive since Q1, 2014 - contributing to the strengthening of the currency. This will put additional pressures on companies to streamline their operations even further and might even lead to some drastic cost cutting measures in the operations. It is thus likely that emphasis will be internal operational focus rather than outwards market focus. Whether that is the best strategy is for every company to decide for themselves.

The bigger picture:

The key for success in the new quota year is not only how well the companies can streamline their operations or how much of their quota they will catch in the new year - it is how successful the companies will be able to position themselves in the market and the focus on increasing the value of their products and for their customers. That is where the companies have the chance to find their own competitive niche in the market.

For more on the TAC utilization keep visiting seadatacenter.com. Please contact us at info@seadatacenter.com for more information.

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