Below is a summary of the business news of relevance in Iceland the week beginning on 15 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, 24 May 2023
Alvotech lost 276 million USD in Q1 2023 - Further funding considered
Market price of Marel increases following exit of US firm Capital Group
Improved credit rating of the Icelandic State will benefit everyone but lack of productivity is concerning
Parliament passes legislation in accordance with EU Green Deal
Arion Bank issues 300 million EUR bond
Forecasting high interest rates until the end of 2025
Icelandic VC funds with a positive cash position after the past couple of years
IT company Men & Mice sold to North American competitor BlueCat
Hedge fund Algildi acquiring shares in telecom company Syn
Enterprise fund Horn IV invests in aviation service companies
Deloitte and EY in Iceland to merge
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Alvotech lost 276 million USD in Q1 2023 - Further funding considered
Net loss of biopharma company Alvotech was 276 2 million USD in Q1 2023, or 1 24 USD per share, compared to net loss of 77 1 million USD or 0 43 USD per share for the same period in 2022, according to an announcement from the company Revenue was 15 9 million USD for the quarter, compared to 0 8 million USD in Q1 2022 The revenue for the year consisted of sales revenue for AVT02, which is a biosimilar candidate for the arthritis drug Humira that Alvotech has permission to sell in certain European countries and Canada. The company is waiting for a satisfactory outcome of an inspection of its facilities in Reykjavik by the US Food and Drug Administration (FDA), which would pave the way for a regulatory approval of the biosimilar to the US market were Humira is the most sold drug. The approval was expected in April last but now all eyes are on 28 June 2023 when the FDA will review its position At the end of the first quarter, Alvotech had cash or cash equivalents of 115 8 million USD, excluding 25 2 million USK of restricted cash In addition, the company had 793 7 million in borrowing According to a report on business website Innherji, the company is considering alternative financing but it cannot confirm if it will seek further funding from Icelandic investors A few months ago, the company raised 20 billion ISK in equity from mainly Icelandic pension funds and investment funds The market value of the company peaked in February this year when the price was 1 900 ISK per share Following the delay of the regulatory approval in the US of AVT02 in April, it dropped by 40% and the current market price is 1.170 ISK per share.
Market price of Marel increases following exit of US firm Capital Group
The US investment fund Capital Group that some 20 months ago was the largest international investor in the food processing solution provider Marel hf (the largest company listed on Nasdaq Iceland) has, according to a report on business website Innherji, now sold all its shares in the company worth a total of 40 billion ISK As a result, the market price of Marel has picked up as investors saw an end to a constant supply of stocks in Marel from Capital Group Following reports of disappointing Q1 results earlier this month, the market value dropped by nearly 30% from 612 ISK per share to 428 ISK per share on Tuesday last week. Since then, the price has picked up as by the end of trading on Friday the price was 450 ISK per share. Capital Group (through its 64 billion USD investment fund Smallcap World Fund) held 5% of all shares in Marel in the autumn of 2021 when it began offering and selling its shares in the company and by the end of last year, it held 1.5% of shares in the company. Last Wednesday, according to the Innherji report, the US fund sold its remaining shares in Marel for 430 ISK per share, or a total of 1 7 billion ISK Four of the largest pension funds in Iceland, mainly Gildi, have been buying shares in Marel in recent months and according to Innherji, the four of them now hold 20 8% of all shares in the company The reason why the US fund has been selling its shares in Marel is, according to Innherji, that the giant global fund has been liquidating stocks all over the world during the economic turmoil of last years to address the redemptions from its funds by investors
Improved credit rating of the Icelandic State will benefit everyone but lack of productivity is concerning
In an interview with daily newspaper Morgunbladid, Minister of Finance Bjarni
Benediktsson said it is pivotal for the Icelandic State to improve its credit rating as it will not only benefit the Treasury but also the financial sector, the fisheries, and other capital-intensive industries in Iceland He added that the preferred debt position of the Treasury is 20% of GDP, as it was in 2019 or prior to the Covid pandemic, but it currently it stands at 30% Benediktsson points out that there are clouds of uncertainty over the Icelandic economy as the growth is dependent on increased population and immigration rather than increased productivity Even though the growth of the economy is among the highest of the OECD countries since 2019, it is the lowest per capita, which is concerning according to Benediktsson.
Parliament passes legislation in accordance with EU Green Deal
The Icelandic parliament has passed legislation on a system for accounting for sustainable investments in accordance with the EU Green Deal, where the objective is zero net emissions of greenhouse gases by 2050 and to decouple economic growth from resource use According to daily newspaper Morgunbladid, the new regulation is not only to prevent green washing but also to direct capital to sustainable investments where the finances and economic interests of businesses will be integrated into sustainable practises
Arion Bank issues 300 million EUR bond
Last week Arion Bank issued senior preferred notes worth 300 million EUR with a maturity of 3 years and a pay coupon of 7 25% According to a statement from the bank, it corresponds to a spread of 407 point over mid-swap and “The final orderbook stood firm at EUR 600m+ from over 70 individual accounts from more than 15 countries across Europe and Asia“ The week before Islandsbanki issued bonds worth 9 billion ISK with 400-point yield on non-indexed bonds
Forecasting high interest rates until the end of 2025
Analysts at Arion Bank are predicting an economic growth of 5.1% this year, which is due to growth in population, private consumption, and tourism, and that interest rates will increase this year by 1 5% and maintain high until the end of 2025 Expected growth for the coming year is 1 6% as private consumption and levels of investment will slow down and growth in the tourism sector will saturate Expected interest rates by the end of 2025 are 5 5% In a survey from the Central bank of Iceland, market parties expect 9 4% inflation this year, 6 3% in 2024 and 4 8% in 2025
Icelandic VC funds with a positive cash position after the past couple of years
Five Icelandic VC funds that raised in total 43 billion ISK in 2021, when interest rates were low, have a positive cash position after having invested for “only” 13 billion ISK over the past two years, according to a report on business website Innherji The value of growth companies has dropped significantly, which has resulted in fewer opportunities to raise funds and more challenges in the operations of the companies Investments in startups by Icelandic parties peaked last year at 390 million USD, compared to 161 million USD in 2021, 223 million USD in 2020 and 84 million USD in 2019, which at that time was a record breaking figure According to Innherji, the investment opportunities for the VC fund are fewer as investors are reluctant to sell under the current market conditions.
IT company Men & Mice sold to North American competitor BlueCat
IT company BlueCat Networks, which has its headquarters in Toronto and New York, has acquired the Icelandic software company Men & Mice, according to business website Innherji. The two companies are competitors in developing DDI solutions that relate to core network services, enabling communication over IP-based networks. The sale price is confidential, but the company was valued at 3.5 billion ISK at the end of last year The turnover in 2021 was 1 billion ISK and the number of employees was 50 The enterprise fund SIA III (mainly backed by Icelandic pension funds) bought 93% of the company in 2019 for 830 million ISK The US investment bank AGC Partners managed the sale process that began last autumn
Hedge fund Algildi acquiring shares in telecom company Syn
The hedge fund Algildi has been acquiring shares in telecom company Syn in recent days, according to a report on business website Innherji. At the start of this month, the share price dropped from 57 5 ISK per share to 47 8 ISK last Tuesday or by 17%, following the publication of the Q1 results where EBITDA had shrunk by 12% Algildi now holds 5 7% of all shares in the company and is the sixth largest shareholder Investment fund Akta has been selling its share in the company, according to the Innherji report By the end of last week, the market price was stable at 49 8 ISK per share
Enterprise fund Horn IV invests in aviation service companies
Enterprise fund Horn IV, operated by Landsbref, has bought 45% of shares in the holding company REA, which owns the airport service company Airport Associates that operates in Keflavik International Airport and the private jet service company SouthAir, which also operates in Keflavik Airport Both companies have a long history of servicing airlines and hold contracts with many of the airlines flying to and from Keflavik Horn IV is a 15 billion ISK fund that invests in unlisted companies in Iceland
Deloitte and EY in Iceland to merge
Last week accounting firms Deloitte and EY in Iceland announced the possibility of a merger, and that the merged firm would operate under the name of Deloitte. The expected merger is conditional on the approval of competition authorities following a due diligence procedure.
