Iceland set to be hit by a £140m bill to run its freezers as energy prices soar
Iceland will be hit hard by soaring energy bills this year because of its huge reliance on freezers.
The frozen goods retailer had a massive £70m energy bill last year, equivalent to around 2pc of its sales. In the first quarter alone its bill jumped by £19m, suggesting it is on course to more than double this year.
Energy prices have spiralled in the wake of Russia’s invasion of Ukraine. And the discount grocer, which has close to 1,000 UK stores, is exposed because a third of its sales are frozen food.
In its most recent annual report, Iceland said the volatile energy market means it will be ‘unable to avoid a temporary reduction in profits’ this year.
Ratings agency Fitch said the low profit margins and relative lack of hedging, where companies agree with suppliers to set prices far in advance, leave it vulnerable to the volatility.
Fitch expects Iceland’s profits this year to drop below £100m, compared with £126m last year, as it will not be fully able to pass on the increasing energy costs.
The agency added that if energy costs continue soaring, profits will be consistently lowered and it will be less able to pay down its debts. Despite the bleak outlook for energy prices Iceland said it would increasingly pick up customers from rivals, as shoppers move from fresh to frozen goods to save cash.
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