After a very challenging 2020, impacted by coronavirus pandemic (SARS-CoV-2) disruptions, Nuuk, Greenland-headquartered Royal Greenland has made a strong recovery. The interim result for 2021, announced on August 10, shows a profit of DKK 120 million, making it the best performance ever.
The frozen seafood specialist achieved a better performance on only one previous occasion. That was during the record year 2019, when the interim result was DKK 228 million, including a profit of DKK 141 million from the sale of two trawlers. The profit of DKK 120 million for the first half 2021 is due to a revenue increase of 19%, which also exceeded the 2019 result.
The 2019 result provides a better basis for comparison than 2020, which was severely affected by the Covid-19 health crisis and economic disruption caused by ensuing lockdowns. The final result for the year is expected to reach a level of DKK 150-200 million. This is subject to uncertainty, however.
The interim profit from ordinary operations before the sale of fishing trawlers increased by DKK 136 million, and compared to 2019 as a “normal year,” the result improved by DKK 33 million.
The positive development was driven by snow crab and coldwater prawns as the core species, as well as the pelagic species, which made strong progress in 2021. In addition, the company’s cost level has now been adjusted to the Covid-19 situation.
Activities in Atlantic Canada in particular had a major impact on the positive result. Despite higher raw material prices, an early start to the season, together with attractive market conditions in North America and Japan resulted in improved earnings for snow crab. Better market conditions also affected crab activities in Greenland.
In China, the market and logistics conditions were severely affected by the pandemic. Sales of shell-on prawns were affected in Q1, but improved in Q2, however, returning to a more normal level in volume terms. Sales prices for shell-on prawns are rising. Meanwhile, there was success in increasing sales in Russia, compensating for the lower sales in China.
Concerning the market for cooked and peeled prawns, the pandemic has affected sales to the foodservice segment in Royal Greenland’s largest markets, the UK and Europe, which were strongly impacted by the lockdowns. Prices for cooked and peeled prawns are improving, however, as is sales volume.
The new pelagic trawler Tasiilaq, which was acquired in November 2020, has utilized the allocated capelin quota effectively. Fishing for blue whiting also reached a good level. The prospects for the capelin quotas in the coming years are favorable.
For Greenland halibut and cod, sales in the first half-year are still affected by difficult market conditions as a consequence of the pandemic. For both categories, prices have not been re-established at the usual levels. The most important markets for Greenland halibut are in Asia, where fortunately the markets are gradually normalizing.
Even though many restrictions are being lifted in most markets, Covid-19 continues to be a major concern. Compared to 2019 as a “normal year,” revenue excluding snow crab has dropped by 17%. Foodservice sales are thus at index 71 compared to 2019, while the retail segment is at index 89. The positive development in the industrial sector is due to snow crab exports primarily to North America.
Royal Greenland’s net profit for H1 amounts to DKK 58 million, compared to DKK 39 million for the same period last year. As a consequence of increasing activity and lower stock levels, working capital was reduced by DKK 131 million. Interest bearing debt increased by DKK 169 million compared to the same period in 2020.
Market Normalization Expected
As Covid-19 vaccine programs are rolled out and social and economic restrictions in various countries are lifted, the markets are expected to continue to normalize, with positive development in sales of Royal Greenland’s wild-caught, high quality products.
The company’s focus is naturally on reestablishing core activities’ sales and earnings levels, but also on getting back on track with its strategic ambition to maximize the value of existing resources, and to achieve growth from supplementary core activities.
The first half of 2021 has provided a good starting point, due particularly to an early start to the snow crab season in Atlantic Canada. A general normalization of market conditions is expected during Q3 and Q4, which is important as this period includes the major sales season for coldwater prawns and Greenland halibut, with sales related to the Lunar New Year in East Asia as well as Christmas and New Year celebrations in the Western world.
Royal Greenland’s profit on ordinary operations before tax is not expected to be back at the 2019 level, but is likely to improve significantly to a level of DKK 150-200 million.
The general course of the global economy, including the market consequences of Covid-19 and Brexit, still constitute very significant uncertainties, however.
