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Irish Continental Group (ICG) - a Dublin-headquartered business that specializes in operating roll on/roll Off passenger, freight and container freight services on routes between Ireland, the United Kingdom and Continental Europe - has warned that it expects bunker fuel costs to increase 'substantially' in 2015 as a result of the EU Sulphur Directive, highlighting the challenge it faces in educating the market about the subsequent rise in fuel surcharges.

In a statement, ICG said: "A further challenge will be to educate the marketplace regarding the effects of the EU Sulphur Directive which will come into effect for all of Eucon's operations from 1 January 2015. The effect will substantially increase the cost of bunker fuel and will result in increased fuel surcharges. This increased cost will have to be borne by the end customers. This action will be necessary in order to maintain a viable freight network for the benefit of Ireland's exporters and importers."

Under existing regulations, global limits on the sulphur content of marine fuel are set to be reduced from 3.50 percent to 0.50 percent on January 1, 2020.

From January 1, 2015, sulphur limits within Emission Control Areas (ECAs) covering the Baltic, North Sea, North America and the Caribbean Sea will be cut to 0.10 percent. As a result, shipping firms operating in ECAs will be given the choice of either investing in scrubber technology in order to be able to continue burning marine fuel with a sulphur content above 0.10 percent, or switching to using more expensive marine gasoil (MGO).

In its latest financial results, ICG revealed that its ferries division, which comprises Irish Ferries - the leading ferry operator to and from the Republic of Ireland and the group’s ship chartering activities - achieved an operating profit (before non-trading items) of €24.9 million last year compared with €22.4 million in 2012. Revenue in the division was 1.1% higher than the previous year at €161.7 million.

ICG said that the increase in profit was due principally to increased freight revenue and lower bunker fuel costs, partially offset by reduced passenger revenue.

Fuel costs for the ferries division were down €3.5 million (8.9%) to €35.8 million in 2013. Revenue in the first half of the year was virtually flat at €69.4 million (2012: €69.5 million), while the second half saw an increase of 2.0%, to €92.3 million (2012: €90.5 million).

Meanwhile, fuel costs for the container and terminal division declined by 6.5% to €13.0 million (2012: €13.9 million). Revenue for the division increased to €104.3 million (2012: €97.4 million). Operating profit was up 24.4% to €5.1 million (2012: €4.1 million) and overall container volumes shipped rose by 10.4% compared with the previous year at 279,200 teu (2012: 252,900 teu).

Overall earnings before interest, taxes, depreciation, and amortization (EBITDA) for ICG in 2013 rose by 7.4%, to €49.2 million. This was said to be mainly due to higher freight volumes in both RoRo and LoLo and lower fuel costs (down €4.4 million to €48.8 million). Revenue for the year was up 3.4% to €264.7 million. Earnings before interest and taxation (EBIT) increased by 13.2% to €30.0 million.

Commenting on the results, ICG said: "2013 was a successful year for the Group with a solid financial and operational performance in a competitive passenger and freight market place. The improving economic outlook in Ireland has encouraged us in our recently announced investment in the charter of an additional vessel, the Epsilon, which has been trading since mid December. RoRo freight volumes are up 18% year on year, to date, despite adverse weather conditions which have led to cancelled sailings."