Positive future outlook despite a difficult 2020
Recently, at our General Assembly in Nuuk, Greenland, the results from 2020 were approved by our owner, the government of Greenland.
Despite our considerable efforts, Royal Greenland A/S has not been able to offset the financial impact of the market turmoil and resulting lower sales prices triggered by the Covid-19 pandemic.
The Group reported an EBIT loss for 2020 of DKK 44 million. A further loss amounting to DKK 15 million concerns the replacement of a pelagic trawler, which brings the total pretax loss to DKK 59 million.
Royal Greenland experienced a historic decline in turnover of 9%, which was the direct result of plummeting sales prices for the company’s core products: during 2020, sales prices for shell-on prawns, cooked & peeled prawns and Greenland halibut fell between 15% and 20%.
The loss came after a record year in 2019. The company was thus in sound shape when choosing to maintain fishery and production at more or less the same level as previously, acting as a buffer towards the markets in order not to create socio-economic problems in the many local communities where we source and operate.
Financial reserves remain intact
Despite the negative performance, our financial reserves were not challenged, due in part to a careful development of our working capital. The Group negotiated additional credit facilities totalling DKK 700 million with credit institutions in early 2020, but the additional credits have not been utilized. A number of measures to protect results and liquidity took place during the year, such as a hiring freeze, a pay freeze and greatly reduced travel activity.
Production maintained despite pandemic
Early in the year, it was already clear that the pandemic would have a significantly negative impact on Royal Greenland’s earnings. Despite this, the company decided to continue to fish, land catches and produce roughly as originally planned.
In order to live up to our widespread social responsibility as an important, and often the only, company working within fishing in the local communities, Royal Greenland chose to maintain fishery and production at approximately the same level. Ergo, Royal Greenland has acted as a buffer between reduced world markets and a normal supply chain.
This is best illustrated by the fact that in 2020, Royal Greenland employed the equivalent of 1452 full-time employees in Greenland, which is 20 more than in 2019.
The company landed 62,000 tonnes of seafood from inshore fishermen in Greenland, at an average price that is just barely 7% lower than in 2019, which was a record year. In Atlantic Canada, landings amounted to approximately 20.000 tonnes.
The eight sea-going vessels in the Group’s own fishery caught a total of 58.500 tonnes of seafood compared to 55.700 tonnes in 2019. The two new trawlers M/tr Sisimiut and M/tr Avataq that were put into operation in 2019 and early 2020 fished and delivered to a significantly higher standard and unloading time has been reduced from three to four days to now 16-24 hours.
The local communities in which fishermen and our employees live and work have thus been protected against the worst consequences of the Covid-19 pandemic.
In Royal Greenland’s opinion, a more restrictive approach to activity level would have caused permanent damage to the access to resources and resulted in socioeconomic problems for local communities in both Greenland and Canada. For Royal Greenland, social sustainability are not just words, but a tangible commitment to taking great social responsibility, even when it comes at a high financial cost.
The pandemic resulted in two waves of lockdowns for communities in Europe and Japan, while restrictive market access to China was initiated, making 2020 an unusually difficult sales year for Royal Greenland.
Over the past few years, the Royal Greenland Group has consciously directed its sales towards food service in Europe and Asia in general and more specifically, towards China. For both initiatives, the intention is to reach customers who value, and will therefore pay for, high quality products that are only available in limited quantities. This remains a good strategy – but there is no doubt that in 2020, it lead to Royal Greenland being hit particularly hard by the pandemic.
Food service sales in Europe were not only affected by the shutdowns of restaurants and hotels, but also by the closure of canteens in many workplaces and educational institutions.
Sales to China, which is currently Royal Greenland’s largest single market constituting 20% of the company’s total sales, were affected by stricter import procedures in China and a zero-tolerance policy for Covid-19, which created consumer skepticism towards imported food in general and towards fish and shellfish in particular as well as the closure of harbours and cold stores.
This reduced sales to food service, and China's actions forced Royal Greenland to move significant sales volumes to more competitive channels and markets.
At the end of 2020 the distribution of revenue by regions nevertheless represents a healthy risk diversification. The US market has, as the fourth key region in the market region portfolio, grown to 14% of revenue, with particularly high demand for snow crab and cooked & peeled prawns.
With stable production volumes we were thus able to guarantee deliveries and managed to protect our positions in the markets, ready to grow again with our customers as markets open. All through the year the Group prioritized local market presence and customer dialogue, and accelerated development of digital product platforms for stronger customer interaction.
High investment levels maintained
Despite the pandemic, 2020 also brought a number of offensive measures and investments.
In terms of sales, e-commerce efforts were strengthened, especially in China and Japan, and joint ventures were launched in Chile and Canada, opening up new products and market opportunities.
Royal Greenland A/S has also decided to continue its planned trawler investments. Two new trawlers were initiated into the fleet in 2019 and 2020 and the prawn trawler M/tr Nataarnaq is expected to be delivered at the end of 2021. Most recently, a new fishing trawler to replace M/tr Tuugalik was ordered for delivery in 2022.
In the autumn of 2020, the pelagic trawler Tasiilaq was replaced by a larger trawler with greater fishing and freezer capacity. This has significantly improved conditions to develop pelagic fishing in Greenlandic waters and has already had a positive impact in 2021.
Royal Greenland is confident about the future and is now focused on coming out of the pandemic as a stronger company, so that growth and earnings can be re-established. Implemented cost savings have significantly reduced the break-even point and markets are beginning to open and demand showing promising demand patterns. Profits in excess of DKK 100 million are cautiously forecasted for 2021.