Eimskip Braces for Negative First-Half Returns

Iceland's largest shipping company Eimskip warned on Wednesday that rising costs and ballooning foreign exchange losses would have a "very negative effect" on its first-half results.

Eimskip said in a statement operating conditions in the first four months of the year had been extremely unfavorable.

"Although the company's operating income in this period was in line with schedule, recent increases in domestic and foreign costs, as well as huge exchange rate losses from foreign loans, will have a very negative effect on the outcome for the first half of the year," the company said in a statement.

Eimskip said it had made a net loss in the first four months of the year of about 1.2 billion crowns ($11.5 million). Foreign exchange losses in the period totaled 1.5 billion crowns - a comparable burden to that shouldered in the whole of 2000.

In May, foreign exchange losses increased even further, it said. The Iceland crown has weakened more than 24 percent against the U.S. dollar since the start of 2001, hit by the central bank's decision to end exchange rate targeting and a fishermen's strike.

"Normally the weakening of the Icelandic crown leads to increased revenues, since a large part of the company's income is derived from foreign currencies. However, this was now counterbalanced by lower exports caused by a long-term fishermen's strike and by a decrease in some fields of import, such as cars," Eimskip said.

"A continuous drop in the domestic stock market this year has furthermore had negative effect on the outcome of the investment operation," the company added.