Aquaculture for all

Iceland Seafood Market Report


The fisheries industry is one of the mainstays of the Icelandic economy, particularly at the present time when the importance of foreign currency generating sectors has increased.

In 2009, marine products accounted for 42 per cent of Iceland's total export value. Europe is by far the most important marketing area with approximately 80 per cent of exported marine produce being sent to European countries. Preliminary figures show that approximately 10 per cent of DIP in 2009 was derived from the fisheries industry.

The sector employs 7,300 workers, which is approximately four per cent of Iceland's total work force. The sector is responsible for the creation of a wide range of derived jobs and is important for many service, import and consultancy companies that depend on servicing the fisheries sector for their survival.

The operation of fisheries companies has generally been successful in recent years. The years 2008 and 2009 were particularly good as regards EBIDTA-margins which were more than 25 per cent. There is every indication that 2010 will also be a good year for the sector.

Positive aspects in the operation at present include the low exchange rate of the krona and high product prices. The extensive and comprehensive restructuring efforts of recent years are now coming to fruition. The restructuring activities have lead to companies becoming larger.

There are fewer fishing vessels and fewer workers. This has been achieved despite quota reduction, high oil prices and increase changes imposed on the sector. The operating results, however are poorer when depreciations and financial items are taken into account.

The EBITDA-margin in the fisheries sector has increased steadily over recent decades. The margin in the period 1980-84, before the adoption of the quota system, was approximately seven per cent.

During 1984-91, before trading in catch quotas was permitted by law, the margin was generally around 15 per cent. From 1991 to 2008, the margin increased to approximately 20 per cent. This is an interesting development in light of the fact that during the same period cod quotas had been significantly reduced.

The debts of the fisheries sector have generally grown at the same pace as those of other sectors in Iceland in recent years, if the financial sector is excluded.

Net debts amounted to ISK 465bn at the close of 2008, a figure which is high. The ratio between net debts and EBITDA was 3.7 in 2001. The same ration had risen to 9.8 by 2008.

The greater part of the debt is due to companies investing in catch quotas, ie. direct purchases of such quotas or through company mergers. The fall of the krona, moreover, has had a considerable impact.

There is a considerable difference in the debt positions of individual companies. Companies controlling approximately 64 per cent of allocated catch quotas will probably be able to meet their commitments.

Other companies will need debt adjustment (26 per cent) or will become bankrupt (10 per cent).

The situation is worse when the number of companies in each group is taken into account as this indicates that smaller companies are, on average, in greater debt.

The depreciation method in the fisheries sector is likely to have a severe impact. Access to catch quotas, in most cases, is a basic precondition for operation of the company in question.

Depreciation has a negative effect on the value of catch quotas and thereby on company finances.

Moreover, depreciation has a negative impact on the operation as the companies are thereafter expected rent catch quotas for a fee.

It is clear that loans to fisheries companies are significant items on the balance sheets of the three largest banks.

Iceland is in 15th place on the list of major fishing nations in the world. The total catch of the Icelandic fishing fleet has declined over past decades. The most serious aspect is that cod, the most important stock as regards value (36 per cent) has fallen steadily as a proportion of total catches.

Thus cod catches in the waters around Iceland were 430,000 tonnes in 1980 but only 151,000 tonnes in 2008.

Other demersal fish species have not managed to counterbalance the declining cod catch. The situation has been improved mainly through catches of new species, such as blue whiting and mackerel, as well as increased herring fishing.

The Icelandic fisheries sector is engaged in fierce competition in international marine produce markets where the quality of the product, delivery, security and services are of vital importance.

Icelanders' interests here are considerable. It is of the utmost importance that fish stocks in Icelandic waters provide the national economy with the highest possible returns while remaining sustainable.

In light of this, agreement on the arrangement of fisheries management must be reached as soon as possible.

Under the present circumstances precious time and energy is being wasted. It would be better used in finding ways to maximise value creation from available fish stocks and to strengthen the competitive position of Icelandic companies internationally.

July 2010

Further Reading

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