Stocks Tumble, Gasoline Soars

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Iceland has not been immune to the economic effects of the Russian invasion of Ukraine. Gasoline prices rose to ISK 303 ($2.27; €2.06) per litre around the country this morning, while diesel prices also surpassed ISK 300 per litre. Nasdaq Iceland’s index has dropped 12% since the invasion began, with the value of Icelandair stocks dropping by 32%. This drop has entirely erased the stock exchange’s steady gains over the past year.

Nasdaq Iceland’s selected share index hit a low in March 2020 at the beginning of the COVID-19 pandemic. It rose gradually from that date, until reaching a high point last September, RÚV reports. The day the Russian invasion began, the selected share index dropped by 6%. The stock index remains significantly higher than it was in March 2020, but its gains over the past year have been fully erased.

Íslandsbánki’s Chief Economist Jón Bjarki Bentsson outlined the three main factors causing stock prices to fall in Iceland. Firstly, the uncertainty created by the Russian invasion of Ukraine has pushed investors to opt for less volatile assets. Secondly, rising energy and raw material prices impact the operations of companies that depend on those resources. Thirdly, the uncertain economic outlook on a global level may impact how well Iceland’s tourism industry bounces back from the pandemic and how many people travel to Iceland in the near future. This last factor impacts companies such as Icelandair significantly.

Rúnólfur Ólafsson, CEO of the Icelandic Automobile Association, has pointed out that rising gas prices impact often impact those who are the most disadvantaged, as well as impacting the cost of transporting goods and the cost of snow removal for municipalities. He called on the government to temporarily lower taxes on gasoline in order to mitigate the impact.

Króna Strengthens as Corona Wanes

Why is Iceland so expensive?

The Icelandic króna has risen in value against the Euro this summer and in fact has been strengthening against the Euro since the beginning of this year, RÚV reports. At the start of 2021, one euro cost ISK 157, while now it costs ISK 147.

According to Daníel Svavarsson, director of Landsbanki’s Economics Department, the foreign exchange market is extremely driven by expectations and the boom at the beginning of the year was largely based on what could be called vaccination optimism. In recent weeks, investments related to the large share offerings of Íslandsbanki and the airline PLAY have also made an impact.

“The biggest reason is the success of vaccinations and the fact that the pandemic has been steadily declining, which has increased optimism in the tourism industry,” says Daníel. “In recent weeks, the main forces have been linked to the flow of foreign investors into the stock market.”

Asked whether he expects the Central Bank to respond to the increased appreciation of the króna, Daníel says he does not foresee that the bank will fix the exchange rate to a certain value. “On the other hand, the Central Bank has been very active in the market in coming in and evening out fluctuations, whether strengthening or weakening.”

Daníel expects the króna to continue appreciating in the near future, though he warns it can always fluctuate in both directions in the short term. “Looking ahead to the next six months, I now rather expect it to be on the strengthening side. Given the current situation and the good performance of the tourism industry, where the resurrection has been faster than people dared to hope, I now rather expect it to continue to be relatively strong.”

Icelandair Aims to Raise ISK 29 Billion Through Public Stock Offering

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Icelandair hopes to raise up to USD 200 million [ISK 29 billion; €1.82 million] in equity through a public stock offering in June. The company’s board of directors announced their intentions, which they say is “an important part of the financial restructuring of Icelandair Group,” in a statement sent to the Icelandic Stock market on Thursday night.

If approved at the company’s shareholders’ meeting in May, the stock offering would “enable the Board to increase the share capital of the Company by up to 30,000 million new shares,” reads the statement. “The Board further proposes that current shareholders waive their pre-emptive rights to the new shares. The public, along with other investors, will thereby be given the opportunity to subscribe to new shares in the Company. Furthermore, the Board will have unilateral authority to determine the allocation of new shares, but efforts will made to provide full allotment to existing shareholders and employees.”

See Also: Icelandair Lays Off Record 2,000 Employees

The announcement comes in the wake Icelandair laying off 2,000 employees on Tuesday in the single largest layoff in Icelandic history.

“Icelandair Group has been in close contact with the Icelandic Government” during its restructuring process, concludes Thursday’s statement, which also notes that the Icelandic government “is willing to consider granting the Company a credit line or providing a guarantee for such credit line conditioned upon the completion of the share offering.”

Icelandair will publicly announce the price of the new shares, as well as related terms and conditions, following the proposal’s presumed approval at its upcoming shareholders’ meeting.

Reykjavík Pride and NASDAQ Address “Gay Glass Ceiling” in Iceland

Gunnlaugur Bragi Björnsson, the President of Reykjavík Pride, rang the Icelandic Stock Exchange bell at 9.00am on Thursday morning to celebrate a new collaboration between the two organisations, Vísir reports. The aim of the partnership is to get a conversation going around the status of LGBTQIA people in the business world, as recent studies published in the US have shown, for instance, that gay men are less likely than straight men to become senior executives.

“The goal is to start a conversation, to start an informed conversation that will then lead to increased awareness about the status and rights of LGBTQIA people, [as well as] ways to improve the circumstances of LGBTQIA people and in so doing, improve the business world overall,” remarked Páll Harðarson, president of NASDAQ Iceland.

Although the issue has not really been taken up in Iceland thus far, but the so-called “gay glass ceiling” has already become a topic of discussion in places like the US and UK. “…[T]he situation is not what it should be,” said Páll.

“Studies in the US show that gay men are more likely to become middle managers than straight men, but they are, on the other hand, much less likely to become high-level executives,” said Gunnlaugur Bragi.

Icelandic Company Marel Listed on Amsterdam Stock Exchange

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Shares in Icelandic food processing company Marel were admitted to trading on the Euronext stock exchange in Amsterdam this morning, Kjarninn reports. The company’s shares rose in value immediately as trading began. Marel will continue to be listed on the Iceland Stock Exchange as well.

Marel is one of the world’s largest manufacturers of food processing machinery, employing around 5,500 people in over 30 countries. The company’s total market value has been estimated at €2.82b (ISK 393b/$3.2b).

“The listing on the Euronext Exchange will support the next steps in the company’s development and support ambitious growth goals,” stated Marel CEO Árni Oddur Þórðarson. “Our vision is a world where high quality foods are produced in a cost-effective and sustainable way.”

Icelandair Explains Steep Price Hikes Following WOW Closure

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Icelandair issued a statement assuring customers that no price changes were going into effect due to WOW air’s closure. Stundin reported, however, that the airline’s ticket prices have risen rapidly: up to 200% on some routes in just a few days. Following WOW air’s announcement yesterday that the company was ceasing operations, the value of Icelandair stocks went up by 13%. At the same time that Icelandair shares were rising, the stocks of most other companies on the Iceland Stock Exchange were losing value.

Increased demand drives price hikes

Higher prices since WOW’s announcement are a consequence of increased demand, says Icelandair, which has caused customers to buy up the lowest fares. “The price of airline tickets is based on demand and in recent days and weeks, there has been a significant demand for our flights, and now as well due to the discounted rates we’re offering WOW passengers. In some cases, there are only first class seats available or else flights are fully booked.”

Icelandair released a discount price schedule for stranded WOW air passengers on Thursday afternoon. Per the announcement on their website, the discount fares are only available to travelers who have already embarked on their journey, and who have a return ticket with WOW air between March 28 and April 11. Fares are based on availability, but are currently listed as $60 to and from Europe; $100 to and from North America, and $160 on Europe-North America or North America-Europe flights (via Keflavík).

Prices could rise in future

Airline competition will not be enough to maintain low flight prices to and from Iceland, according to one specialist. Kristján Sigurjónsson, journalist and editor of Icelandic travel media outlet Túristi, told RÚV it is likely the cost of flights to and from the country will rise in the coming months. “Flight prices have been unusually low and we passengers have been flying at the cost of [airlines] in recent years and that is unlikely to continue,” Kristján stated, adding that while competition between airlines may temporarily keep prices low on certain routes, they will likely rise.

All Executive Positions in Stock Market Companies Held by Men

All of the executives for all of the companies listed on the Icelandic Stock Exchange are men, RÚV reports. Fourteen men have been hired as CEOs at these companies in the last seven years, while not a single woman has been hired to an equal position in same time period.

There are eighteen companies listed on the Icelandic Stock Exchange (also known as Nasdaq Iceland). Eighteen men are employed as executives or directors there, but no women. There are twelve men in management positions at these companies, while six women act as managers for Arion Bank, Marel, Hagar, Síminn, Sjóva, and VÍS.

It’s a status quo that people such as Katrín Olga Jóannesdóttir, the chairman of the board at the Iceland Chamber of Commerce, lament in light of Iceland’s professed commitment to correcting gender imbalances and addressing equality issues. It’s also notable that when Katrín Olga took over as the Chamber of Commerce’s chairman last year, it was the first time since 1914 that a woman had held the position. At a recent conference on commerce and business, she took the opportunity to call attention to women’s status in the business world.

“I think it’s sad, I must admit. Business opportunities are being missed,” she remarked. “This is, of course, the tradition—men are normally the role models. And maybe it’s normal, too, that when women are knocking on the door, they don’t want to move over.”

Iceland established a gender quota by law six years ago, and yet women still only have executive roles at less than 10% of the country’s 400 largest companies.

“It’s not because of the Icelandic business world that Iceland is number one on equality issues,” continued Katrín Olga. “It’s because of the public sector.”

Katrín Olga believes that more men need to be involved in the process of overcoming the gender deficit. “It’s so easy to dismiss women who talk about equality issues because a woman is, in a way, talking about herself,” she said. “It pains me as the chairman of the board at the Chamber of Commerce, because we are working from the premise that private enterprise and individual freedom is what matters. Which is why I think that we need to be a role model in this area.”

 

Icelandair Outsourcing Operations to Estonia

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Icelandair is outsourcing some of its operations to a subsidiary company based in Estonia, the airline’s interim CEO Bogi Nils Bogason told Viðskiptablaðið in an interview on Thursday.

Bogi Nils, Icelandair’s chief financial officer, is temporarily filling the role of CEO following Björgólfur Jóhannsson’s departure from the position on Monday. The airline experienced a sharp dip in its stock after it was revealed that “passenger revenues will be worse than projected” this year, namely 5-8% ($50-80 million) lower than expected.

“Iceland has become expensive in comparison with many other countries,” Bogi Nils stated in his interview with Viðskiptablaðið. “We’ve reached the size where it could be advantageous to outsource or transfer certain operations,” he continued. “We’re seeing airlines do that.”

Bogi Nils pointed out that it has operated a subsidiary company in Estonia for many years. “We’ve been building it up there and moving certain basic operations there. We’re going to continue on that path.” The Estonian subsidiary currently sees to revenue bookkeeping for Icelandair and other accounting and other back-office operations are set to be transferred there as well.

There are no plans to move Icelandair onboard crews to Estonia, however: Bogi Nils says that this staff will continue to be Icelandic.

Bogi Nils says that the company’s earnings are expected to improve but that “it will take a little time to fix these things.” The overall plan is to address internal issues within departments such as sales and marketing, as well as cost factors such as the better utilization of the airline’s workforce.

Icelandair Shares Dip

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Icelandair shares fell sharply in the first trading of the day on the Iceland Stock Exchange, RÚV reports. Just before 10.00am, the company’s exchange rate had fallen by nearly 20%.

Björgólfur Jóhannsson, CEO of the company, announced his resignation yesterday and the company’s projected profits were lowered. Björgólfur stated earlier this month that Icelandair was well-positioned to respond to market challenges.

Icelandic airlines Icelandair and WOW Air have faced difficulties recently due to rising fuel costs, the slowing growth of tourism to Iceland, and competition from abroad. WOW Air is currently searching for investors who would loan the company up to ISK 12 billion ($113m/€96m) over the next 18 months. The two airlines are a key pillar of the tourism industry, transporting 80-85% of all travellers that visit Iceland.

Stock Exchange to Discontinue Publishing List of Largest Shareholders

The Iceland Stock Exchange (ICEX) has decided to discontinue publishing and distributing a list of the 20 largest shareholders in the companies that are listed on the exchange, Vísir reports.

The decision is motivated by a new privacy act which just took effect, as ICEX considers that the publication and distribution of the list as it is currently done does not meet requirements imposed by the legislation. Registered companies were informed of ICEX’s decision by email and were refunded half of their annual fees due to the changes.

Páll Harðarson, CEO of ICEX, said in a conversation with Fréttablaðið that the companies themselves may continue to publish the lists on their websites, but the approval of the relevant shareholders is required. “They can take the initiative themselves if demand from investors and the willingness of shareholders is at hand,” Páll stated.

Óli Björn Kárason, chairman of the Parliamentary Economic Affairs and Trade Committee, wrote if the new privacy act reduces transparency in the stock market, it works against healthy business practices. “It took decades to fight for the country’s largest companies to publish their shareholders list. Hörður Sigurgestsson, then-CEO of Eimskip, broke the ice,” Óli wrote in a Facebook post. “A healthy and strong stock market is important and a prerequisite of that is the rule of trust. And trust is not obtained unless transparency is guaranteed.”

Páll stated that information about transactions will otherwise be circulated in a similar manner to foreign stock markets. Financially-invested parties will continue to receive notice when company shares exceed certain limits. The information is published in accordance with the Securities Transactions Act. “This kind of information is published in order for the market to be informed of the movements and transactions of entities that have the greatest impact on the management of the companies. I believe that such disclosure is sufficient,” replied Paul when asked what ICEX’s stance was on the changes.

One corporation listed on the Iceland Stock Exchange, real estate company Reginn, has taken the list of twenty largest shareholders down from its website. It remains visible on other corporations’ websites at the time of publishing.