// Iceland is set to see soaring energy bills this year because a third of its sales are frozen food
// According to money experts, Iceland’s profits this year could fall below £100m, compared with £126m last year, as it will not be fully able to pass on the increasing energy costs
Thanks to its reliance on freezers, Iceland will be hit hard by soaring energy bills this year.
The frozen food business saw its energy bill hit £70m last year, equivalent to around 2pc of its sales.
In the first quarter alone its bill jumped by £19m, suggesting that it is on course to more than double this year.
Energy prices have continued to surge in the wake of Russia’s invasion of Ukraine, which began in February.
And the discount grocer, which has almost 1,000 stores across the UK 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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