Another record year for energy sales and production
The business operations of Landsvirkjun went well in 2018. Energy sales have never been higher, amounting to 14,8 TWh. Revenues were also the highest in the company’s history. External factors were favourable. Aluminium prices, for example, increased by 7% between years.
Income statement 2018
Operating revenues have historically been stable at Landsvirkjun, despite fluctuations in the price of aluminium and exchange rates. Operating revenues have increased over the past two years and have never been higher than in 2018, increasing by USD 51 million year-on-year. This increase is mostly explained by an increase in energy sales, higher transmission revenues and higher aluminium prices. Some of the energy sales agreements are linked to aluminium prices.
The Group’s operating profit before depreciation and amortisation, EBITDA, amounted to USD 390 million in 2018. EBITDA development has been in line with the Company’s revenues. Costs have also been increasing, especially due to general salary cost developments and an increase in purchased services and products. The effects of the ISK on revenues and costs even each other out, forming a natural hedge.
Profit before unrealised financial items is the benchmark Landsvirkjun uses to measure the strength of the Company’s core operations. Profits from core operations have improved over the past few years, with the exception of 2016. In 2018 the profit was the largest in the Company’s history, amounting to USD 184 million. High operating revenue is the main reason for the increase in profit between years. An increase in interest expenses negatively affects profit. This is due to a one-off cost in relation to the prepayment of a bond and a loan in the second quarter of 2018 amounting to USD 10.5 million.
The Company´s interest rates are affected by market rates at any given time. The Company hedges interest rate risk in part with the use of derivatives. At the end of 2018 73% of interest-bearing liabilities were subject to fixed rates, taking into account derivative agreements. The increase in interest expenses between years is explained by a one-off cost amounting to USD 10.5 million, relating to the prepayment of a bond and loan in the second quarter of 2018.
Operational outlook
The operational results will, to a large extent, be shaped by the development of interest rates, exchange rates, customer demand and aluminium prices. This is because a part of Company’s loan structure has variable interest rates, a part is not USD denominated, world economic conditions can affect the operations of Landsvirkjun’s customers and the revenues of the Company are partly affected by aluminium prices. Changes in these factors affect the future operating performance of Landsvirkjun but associated risks have been systematically reduced.
Supporting documents
You can download the Financial Statements for 2018 in electronic form here. The documents contain the financial statements as a whole in Acrobat (pdf) document and the key figures in an Excel (xls) document.
