Iceland expects profit hit as higher energy costs bite

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Iceland anticipates a hit to earnings this financial year as the soaring cost of energy takes a toll but said it is well positioned to weather tough trading conditions

Iceland Supermarket

High energy costs may hit Iceland’s profits

An impact on profitability would follow lower profits in the most recent financial year, which the frozen food specialist has filed at Companies House.

The grocer reported: “The food retailing industry as a whole is currently facing unprecedented pressures on both input and operating costs…

“Within our own operations, we are pleased to report that we have been able to offset all cost increases to date – with the sole exception of energy – through early and decisive action to reduce costs in our stores, depots and delivered sales network.

“We are working hard to offset the unavoidable and industry-wide increase in energy costs through increased sales.

“However, we must recognise that there is at present considerable uncertainty and volatility in global energy prices and, while we have forward cover for a proportion of our energy needs, in the absence of market stabilisation we – in common with other retailers – will be unable to avoid a temporary reduction in our profits in the current year.

“Our substantial cash reserves and strong liquidity profile provide us with an exceptionally strong platform during this period of turbulence, as does our long record of consistent cash generation.”

In the year to March 25, Iceland posted a pre-tax loss of £4.1m, compared with a profit of £73.1m the year before.

Its preferred measure of adjusted EBITDA came in at £127.1m versus £171.9m the year before. Sales fell 4.3% to £3.55bn compared with the prior year “of exceptional demand” amid Covid lockdowns.

The retailer reported: “Iceland has always performed strongly in the past during periods when GDP has contracted and household incomes have been squeezed.”

Iceland has introduced a raft of measures to help consumers navigate the cost-of-living crisis, such as freezing the prices of value products until the end of this year and introducing energy-efficient cooking guidance on food packaging.