ROYAL GREENLAND'S RESULT FOR 2022 APPROVED AT THE ANNUAL GENERAL MEETING
On 9 May, Royal Greenland held its Annual General Meeting at the head office in Nuuk, Greenland, where the company's owner, the Greenlandic government Naalakkersuisut, approved the accounts and report for 2022. The picture shows Royal Greenland's CEO Susanne Arfelt Rajamand, Chairman of Naalakkersuisut, Múte B. Egede and Chairman of the Supervisory Board of Royal Greenland, Maliina Abelsen.
2022 has been a year in which Royal Greenland's strategy of full vertical integration in the supply chain and global risk diversification in well-established markets has again proved its worth. The ordinary profit before tax of DKK 235 mill. is lower than last year's result, but approximately on par with 2018 and 2019. Revenue amounts to DKK 5.8 billion, an increase of 2% on 5% lower sales measured in tonnage.
During the Annual General Meeting last week, the Chairman of Naalakkersuisut, Múte B. Egede, began his speech by thanking the company's employees, management and Supervisory Board for their efforts and the excellent financial result that Royal Greenland delivered for 2022 despite challenging market conditions. In the speech, the Government of Greenland's ownership policy was also emphasized. This included providing a good framework for self-government-owned companies to focus on fulfilling their core tasks. For Royal Greenland, the core task is to increase sales of Greenlandic-produced goods. At the same time, the company is expected to continue to undertake an extended social responsibility, including close co-operation with suppliers and by training and developing local talent.
Múte B. Egede acknowledged the Board's ambitions to strengthen the Greenlandic organization and the appointment of Royal Greenland's new CEO, Susanne Arfelt Rajamand, whom he described as showing interest in ensuring the best overall results for society. The Chairman of Naalakkersuisut also recognized Royal Greenland for its ESG reporting efforts and encouraged the company to help other Greenlandic companies where possible. Finally, the Chairman wished the Supervisory Board, the Executive Management and all employees good luck for the rest of 2023.
The re-elected Chairman of the Board, Maliina Abelsen, then presented the company's management report and pointed out that the satisfactory result in 2022 is in fact based on the Greenlandic core activities, where both shell-on prawns, cooked & peeled prawns as well as Greenland halibut and cod have achieved a positive sales development on par with the levels before the pandemic crisis.
Chairman of the Supervisory Board Maliina Abelsen presents the management report for 2022
However, increasing sales prices have not been able to fully compensate for the sharp cost increase due to inflation and rising energy prices, freight and fisheries taxes. Furthermore, 2022 saw a slowdown in several markets due to inflation and a generally more uncertain market situation.
Global presence spreads the risk
The main principle of the North Atlantic Champion strategy, which Royal Greenland has followed for the past 10 years, is a strong vertical integration and a diversification of activities and thus risk across different species, fish stocks and markets in order to achieve stability in earnings. The shift in earnings in recent years between species shows the strength of the strategy.
The fourth version of the North Atlantic Champion strategy focuses on 4 main areas:
The fourth version of the North Atlantic Champion strategy focuses on 4 main areas:
- Markets and sales channels
- Value creation and maximizing the value of the raw material
- Expansion for selected core species and geographies
- Sustainability and responsibility
New trawlers provide increased efficiency in a time of rising costs
Rising global cost levels have underlined the importance of a continued focus on optimizing the value of the raw material in Royal Greenland's fishing and production.
Over the past 5 years, Royal Greenland has carried out a major investment program of newbuilding of 4 modern, ocean-going trawlers for prawn, Greenland halibut, cod and pelagic fishing. The trawlers are built to carry out efficient and sustainable fishing and are designed to also provide the crews with the best working conditions.
In 2023, another newbuilt trawler will be delivered in the form of M/tr Tuugaalik to replace the trawler of the same name, and a further trawler has been contracted for delivery in 2025 to replace M/tr Akamalik.
The Group's fishery in 2022 amounted to 73,000 tons, an increase of 8% compared to 2021, mainly due to increased fishing of pelagic species.
Land-based production on the way to normalization after Covid-19
Royal Greenland operates 37 production facilities in Greenland, of which five are operated in co-operation with local fishermen and employees.
In 2022, there has been a high level of activity in the prawn factories and Greenland halibut production has been stable, while the season for fishing the renowned Nutaaq cod got off to a late start, resulting in a 10% decrease in landings. Investments have been made to increase capacity for cod in both Narsaq and Nuuk, and a new cod factory in Sisimiut is expected to see higher activity in 2023. Attracting sufficient labour during the peak season was also a challenge in 2022, but over the course of the year situation improved as the ongoing removal of Covid-19 restrictions has made it possible to recruit more foreign workers to supplement the local workforce.
In 2022 a total of 60,179 tons of raw materials were landed at Royal Greenland's 37 factories in Greenland
In Atlantic Canada, where Royal Greenland operates nine factories in Newfoundland, Quebec and Nova Scotia, there was a high level of activity in the inshore fisheries that Royal Greenland sources from. The main species are snow crab, lobster and prawns, but sea cucumbers, cod, Greenland halibut and pelagic species also find their way into production. The proximity to the US market has enabled the development of a fresh range of cod, scallops, live lobster and Greenland halibut. In total, 23,800 tons of raw materials were landed and purchased for processing at plants in Atlantic Canada.
A changing global market
Royal Greenland has a balanced spread of sales across four main regions; Asia, Europe, Scandinavia and North America. However, the company did face a number of challenges and market shifts in 2022. Russia's invasion of Ukraine, high inflation and rising energy prices, the finalization of Brexit and ongoing restrictions in connection with Covid-19, as well as a considerable increase in the production prices of Royal Greenland products, have made high demands of Royal Greenland's capacity for change.
In North America, rising raw material prices and a slowdown in demand for snow crab were a challenge. On the positive side, a good market position was established during 2022 for, among other things, Greenlandic Nutaaq cod, and in the spring of 2023, stable sales of snow crab are again being established.
In Europe and Scandinavia, there have been some changes in the composition of revenue after the sale of breaded products to the retail segment was transferred to Espersen A/S. In the Scandinavian markets, sales of shell-on prawns and cod have increased as a replacement for the breaded products.
Turnover in the UK increased by 15% based on a constant volume. There is still no final solution to the challenges created by Brexit, but a free trade agreement is being negotiated between the UK and Greenland. However, a temporary duty-free quantity of cooked and peeled prawns has been established, which can be imported for processing and packing in the UK, but this quantity is far from sufficient to meet demand. It is essential for Greenland that a free trade agreement is made in line with the agreements concluded with Canada, Iceland and Norway.
Royal Greenland ceased selling to Russia at the beginning of March 2022 as a result of Russia's invasion of Ukraine. The company has been able to shift sales from this, the world's second largest market for shell-on prawns, to customers primarily in China and Scandinavia.
The Asian markets have developed very positively, and sales to China in particular have regained pre-COVID-19 levels, compensating for the 2022 slowdown in Europe and North America.
In China, sales of Royal Greenland's consumer packaged products have more than doubled compared to 2021, with sales through both traditional supermarkets and e-commerce. After Covid-19 restrictions were eased in the latter part of 2022, a clear positive development is seen in Chinese consumption.
Negative exchange rate developments on the Japanese yen combined with increasing raw material prices have resulted in a number of price increases throughout the year. The sales organization in Japan has succeeded in generating earnings on par with 2021.
A good starting point for the coming years
Based on the company's mission and vision, with a focus on continuing to create additional value from core species in the form of strong commercial initiatives and operational expertise, Royal Greenland considers itself well equipped for the future. The company will continue to focus on a diverse geographical distribution of sales across markets and segments, with a focus on Asia, Europe, Scandinavia and North America as the primary regions.
Sustainability and social responsibility are at the centre of the strategy as an integral part of Royal Greenland's business and a natural part of the company's DNA. The area is strategically prioritized at the same level as the market and category initiatives, and a number of initiatives within, for example, climate strategy and strengthening talent development in Greenland have been enhanced.
Based on a strong global organization and a strategy and business model that have proven their worth, Royal Greenland has a good starting point for the next several years.