Below is a summary of the business news of relevance in Iceland the week beginning on 1 May 2023. The summary, which is based on publicly available information only, is prepared by the BBA//Fjeldco team for the benefit of clients and contacts of the firm and is subject to the disclaimer noted below.
Wednesday, 10 May 2023
Shares in Marel drop 17.2% following Q1 results
Banks report healthy profits for Q1 2023
Insurance company VIS signs agreement to acquire Fossar Investment Bank
ISK dropped in value by 0.73% in April
International Monetary Fund warns against political pressure on financial surveillance
Real estate prices have increased more in Iceland than in other OECD countries
CBI never drawn on currency agreement with China
Icelandic stock market undervalued by 20%
Fintech startup Monerium’s electronic currencies traded for 9 billion ISK
Merger talks with Kvika bank not a difficult decision for Islandsbanki
Green tech company Carbon Recycling International completing 4 billion ISK funding
Air Atlanta adds two new Boeing 777-300ER aircraft to its fleet
Telecom infrastructure company Mila lost 354 million ISK in 2022
Norwegian contractor to build land-based fish farming facilities for Geo Salmo
Biotech company Kerecis utilising AI to speed up service – 150m Americans can now use their services
Founders of Oculis finalists in European Inventor Awards for 2023
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Disclaimer
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Shares in Marel drop 17.2% following Q1 results
Shares in food processing solution provider Marel dropped 17.2% last Thursday following publication of their Q1 results. The increase in the value of their shares this past year, about 80 billion ISK, disappeared in one day. As Marel represents 40% of the OMXI10 index, it dropped by 7.5% on the day. What caused the turbulence, according to business website Innherji, was that the results of Marel were well below expectations, earnings dropped in all fields of operations and that debts are beginning to bite as the net debt/ EBITDA leverage ratio has increased to 3 5 – up from 1 2 in first quarter of 2022 On Monday this week, the share price dropped a further 3% Since Thursday, the price has dropped from 598 ISK per share to 480 ISK per share US investment bank JP Morgan maintains confidence in the company and argues that the price per share in the company will reach 5 60 EUR by June 2024, which based on current rate of exchange is 840 ISK per share
Banks report healthy profits in Q1 2023
The three Icelandic commercial banks - Landsbanki, Arion Bank and Islandsbankiprofited 20 billion ISK in total in the first quarter of this year, according to statements issued by the banks last week. The profits of the State owned Landsbanki was 7.8 billion ISK compared to 3 2 billion ISK in the same period last year For the first time in several years the return on equity was above the bank´s target or 11 1% compared to 4 7% in the first three months of 2021 Arion Bank reported net earnings of 6 3 billion ISK in Q1, compared to 5 8 billion ISK in Q1 2022 Return on equity was 13 7%, compared to 12 7% in the first quarter of 2022 Islandsbanki profited 6 2 billion ISK and generated 11 4% in return on equity In the same quarter last year, the bank reported a profit of 5 2 billion ISK and 10 2% in return on equity The operations of all the three banks therefore improved significantly in the first three months of this year compared to the same period in 2021
Insurance company VIS signs agreement to acquire Fossar Investment Bank
Last week the listed insurance company VIS signed an agreement with shareholders in Fossar Investment Bank to buy all shares in the bank for 12 62% of all shares in VIS, according to a joint statement from the companies The agreement is conditional upon the approval of regulatory bodies and the shareholders meeting of VIS that will be held within three weeks The merged company will, according to the statement, be able to offer a variety of financial services in the field of insurance, investment banking, private banking, and fund- and asset management Haraldur Thordarson, CEO of Fossar Bank, will become co-CEO of VIS along with current CEO, Gudny Helga Herbertsdottir Thordarson will be responsible for future organisation of the group, financing and the development of financial services while Herbertsdottir will be responsible for insurance operations. Steingrimur Arnar Finnsson, former managing director of capital markets at Fossar Bank, will become head of investment banking operations and Arnor Gunnarsson, former head of investments at VIS, will lead the SIV asset management of the merged company.
ISK dropped in value by 0.73% in April
The currency index for ISK dropped 0.73% on average in April. It fell 1.14% against USD and 0.13% against EUR. The weakening of ISK will increase the price of imported goods and will contribute to rising inflation. However, according to a report in business gazette Vidskiptabladid, the ISK strengthened against the Polish currency sloti, which can only be explained by the substantial number of Polish immigrants in Iceland and their involvement in the Icelandic economy
IMF warns against political pressure on financial surveillance
The International Monetary Fund (IMF) has raised concerns over the fact that a representative from the Ministry of Finance and Economy is a member of the CBI´s committee on financial surveillance, according to a report on business website Innherji The committee is comprised of two deputy governors of the CBI plus three external members that the Minister of Finance appoints. Until recently, one of the external members was a senior civil servant at the Ministry of Finance. The IMF is currently reviewing the Icelandic financial system and flagged the above when addressing the fitness of the members of the committee in question, according to Innherji´s sources. The IMF questions that a senior civil servant in the Ministry of Finance can influence the decisions of the committee overseeing financial surveillance, in part because of conflict of political interests and also because the State is the largest single shareholder in the financial system with 100% holding in Landsbanki and 42 5% in Islandsbanki
Real estate prices have increased more in Iceland than in other OECD countries
Real estate prices in Iceland have increased more in Iceland since 2010 than in any other OECD country according to a report on business website Innherji. Real value of real estate in Iceland has increased by 110% since 2010 compared to 60% in the US, 50% in Sweden, 44% in Norway and 18% in the EURO zone. Market analysts point out that in 2010 the real estate prices were historically exceptionally low – they had dropped by 35%, because of the collapse of the financial system in Iceland in 2008. The price increase is therefore partly a correction. Other issues of significance are that the population has increased more in Iceland than in other comparative countries, economic growth has been greater and purchasing power of the public has also increased more in Iceland than in other OECD countries since 2010
CBI never drawn on currency agreement with China
The CBI has never drawn on a currency agreement that was initially signed in 2010 with the Central Bank of China, according to business website Innherji The purpose of the agreement with an allowance of 70 billion ISK or 3.5 billion YUA is to increase trade between China and Iceland as well as the other Nordic countries. Iceland is the only Nordic state with such an agreement with China. The agreement was last reviewed in 2022.
Icelandic stock market undervalued by 20%
The Icelandic stock market is on average undervalued by 20% according to market analyst Jakobsson Capital in a report where the company compares its own market valuation with current market prices. The average earnings of the last twelve months have been 9% if not accounted for dividend payments or 6.7% on top of the payments. Only beverage and retail company Olgerdin has delivered a good return, or 40%, and the fisheries company SVN and the telecom company SYN have offered acceptable returns, according to Jakobsson Capital However, the companies with the worst earnings are those who are most undervalued, according to the market report
Fintech startup Monerium’s electronic currencies traded for 9 billion ISK
Electronic tokens issued by Icelandic fintech company Monerium on three different blockchains have been traded for 9 billion ISK in 28 thousand transactions since formally launched last summer. As of now there are outstanding 7.9 million electronic euros issued by the company owned by 827 users, according to weekly business gazette Vidskiptabladid. The three blockchains that the company issues tokens on are Ethereum, Polygon and Gnosis. In just over a half year the gross turnover of Monerium tripled from one billion ISK to three says managing director Sveinn Valfells in an interview with Vidskiptabladid
Merger talks with Kvika bank not a difficult decision for Islandsbanki
Islandsbanki’s Q1 results were published last week and in her presentation, CEO of Islandsbanki Birna Einarsdottir stated that it was not difficult to decide whether to enter merger talks with Kvika bank or not as the bank had already approved its growth strategy and had decided to review opportunities in the fields of insurance and asset management in March of last year. In addition to a strong asset management team, Kvika merged with insurance company TM in 2022. According to a statement from Islandsbanki last week, “the companies’ boards believe that the merger can bring significant benefits to shareholders and customers of both.” The companies are currently assessing the synergies to be gained from the merger and the position of the merged company in the market, the statement says. The financial advisors will submit their analysis on the proposed merger before the end of June, which will be followed by the companies´ decisions on next steps
Green tech company Carbon Recycling International completing 4 billion ISK funding
The Icelandic green tech company Carbon Recycling International (CRI), which produces methanol from carbon dioxide and hydrogen, is completing a 4 billion ISK funding from an international investor, according to business website Innherji The purpose of the funding is to speed the growth of the company The turnover of the company was 1 billion ISK in 2022 or 7 million USD and returned 746 thousand USD in EBITDA. However, the company lost 4 million USD last year as the company has been investing in innovative technology and new facilities in China, which has 25 times the production capacity of older facilities in Iceland, according to CRI s CEO Bjork
Kristjansdottir The Dutch bank ING led the funding According to Innherji, the new shareholders are buying the shares for 25 USD per share which is lower than was expected This transaction results in a total evaluation of company of 22 billion ISK
Air Atlanta adds two new Boeing 777-300ER aircraft to its fleet
The Icelandic airline Air Atlanta will by the end of this month have added two Boeing 777-300ER aircraft to its fleet, according to a report in daily newspaper Morgunbladid. The company ´ s CEO, Baldvin Már Hermannsson, says that each aircraft will cost 5 to 5.5 billion ISK. The airline is extending its fleet to 19 aircraft this year. Already the company is operating 14 cargo aircraft whereas the new aircraft will serve passengers flying to and from Saudi Arabia during the Islamic holy month of Ramadan. According to Hermannsson, demand for passenger flights is increasing following a stand still during Covid-19 Air Atlanta quickly adjusted to the market changes in 2019 and focused on cargo flights, which resulted in financially remarkably successful operations The profit of Air Atlanta in 2022 was 2 8 billion ISK, which is a drop of 16% from 2021
Telecom infrastructure company Mila lost 354 million ISK in 2022
Mila, the telecom infrastructure company that French investment company Ardian bought last year for 69 5 billion ISK, lost 354 million ISK in 2022 compared to a profit of 1 1 billion ISK in 2021 The company ´ s turnover was 8 5 billion ISK both in 2021 and 2022.
Norwegian contractor to build land-based fish farming facilities for Geo Salmo
Geo Salmo, a company planning to build land-based fish farming facilities in Thorlakshofn in South-Iceland, has signed an agreement with the Norwegian specialized construction company Artec Aqua to build aquaculture facilities that will produce 24 thousand ton of salmon every year In an interview with business gazette Vidskiptabladid, Torill Kleppe Kleven, CEO of the Norwegian company, says that he hopes to start construction in Q3 2023 and that subcontractors will be hired from Iceland as well as other countries
Biotech company Kerecis utilising AI to speed up service – 150 million Americans can now use their services
It was reported in daily newspaper Morgunbladid that Kerecis, an Icelandic company that specialises in products from fish skin and fatty acids for cellular therapy, tissue regeneration and protection, is developing an AI solution in a cooperation with a US university to speed up the process of deciding if the patient´s insurance company will cover the treatment The objective, according to Kerecis CEO, Gudmundur Fertram Sigurjonsson, is to process the likelihood of a positive decision and begin the treatment immediately instead of waiting for a final decision from the insurance company for up to a week Kerecis announced last month that more private insurance
companies have decided to cover the Kerecis fish-skin technology, in addition to previously existing Medicare coverage and that about 150 million Americans, or about 45% of the country’s population, can now enjoy the benefits of the patented fish-skin treatment
Founders of Oculis finalists in European Inventor Awards for 2023
Thorsteinn Loftsson and Einar Stefansson, who founded Oculis in 2016, have been selected as finalists in the “Research” category of the 2023 European Inventor Awards. They are nominated for their nanotechnology-based eye treatment, which is the result of decades of research in their field. Oculis is a biopharmaceutical company that focuses on ophthalmic drugs and novel drug delivery. The awards will be held in Valencia in Spain on 4 July 2023.
