Dividend payment was decided before war started

12.05.2022 - 14:14
Mynd: RÚV - Þór Ægisson / RÚV
The director of Festi, the company that owns retail chains including Krónan and N1, says the company takes its social responsibility very seriously and is trying to keep prices down. Gross profits have dropped during the year. He says price rises have mostly already shaken out and that he anticipates prices dropping when the war in Ukraine ends. Festi did not anticipate the war when it decided to pay out 1.6 billion krónur in shareholder dividends.

Prices have risen sharply recently—not least food prices—as inflation stands at its highest rate since the financial crisis over a decade ago. The heads of the consumer rights association and the federation of general and special workers have called on large food retailers in Iceland to be socially responsible and give back to society by restricting price rises instead of paying out billions in dividends. 

“I can only concur with these agencies that this inflation that is hitting us, and is to a large extent imported, is something that is hurting our customers and we are trying everything to minimise these price increases. And it can be seen in our accounts for the first quarter of this year that our mark up, or profit margin, has gone down by 1.3 percent between years. I realise these price rises are very big, but we will do all we can to try and minimise the impact as much as we can,” says Festi director Eggert Þór Kristófersson. 

The company board decided last year to pay its owners nearly 1.6 billion krónur in dividends. Eggert Þór says the company’s turnover last year was 100 billion krónur, of which 20 billion was the company’s mark-up. Half the mark-up went to pay wages, and the company’s total debt stands at 23 billion krónur. He says the dividend amount was decided at a time when the urgency of COVID-19 was starting to wane and nobody anticipated a war in Ukraine. He says the company takes its social responsibility very seriously. 

“No question. We really feel it and we take our role very seriously and have done various things to minimise this. We have, for example, stopped selling products that have increase a lot in price from wholesalers, and are trying to find ways to offer different products, we are in reality offering people options, to take out products that have got a lot more expensive and to bring cheaper products instead. That is what we are doing to work every day and we take our responsibility very seriously.” 

He says Festi demands explanation for price rises from its suppliers and drops products when the explanations are unsatisfactory. 

He says he believes the wave of price hikes has already peaked, and foresees many prices going down again when the war ends. “I think there is no question that when this situation passes, things will head for a new equilibrium which I expect will mean lower prices than those we are seeing today.” 

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