Royal Greenland is finding new paths in the toughest year in the company's recent history
While 2020 was a particularly difficult year for Royal Greenland, there is a good basis for cautious optimism in 2021
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.
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%.
Royal Greenland A/S 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. This is obviously unsatisfactory, regardless of whether it was due to a pandemic.
However, Royal Greenland is confident about the future and has now focused on coming out on the other side of the pandemic stronger, so that growth and earnings can be re-established. Profits in excess of DKK 100 million are cautiously forecasted for 2021, not least because implemented cost savings have significantly reduced the break-even point.
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 its widespread social responsibility as an important, and often the only, company working within fishing in the local communities. Royal Greenland has thus 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. The local communities in which fishermen and our employees live have thus been protected against the worst consequences of the Covid-19 pandemic.
In Royal Greenland’s opinion, a more restrictive approach 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, CSR and social sustainability are not just words, but a tangible commitment to taking great social responsibility, even when it comes at a high financial cost.
Difficult markets
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 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 has been to reach customers who value and will therefore pay for high quality products that are only available in limited quantities. This continues to be a good strategy – but there is no doubt that in 2020, it meant that Royal Greenland was hit particularly hard by the pandemic.
Food service sales in Europe were hit not only 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 and constitutes 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 scepticism 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.
Efforts and investments
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.
In addition, joint ventures were launched in Chile and Canada, which will open up new products and market opportunities.
Royal Greenland A/S has also decided to continue its planned trawler investments. The prawn trawler M/tr Nataarnaq is expected to be delivered at the end of 2021, and 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 fish and freezer capacity. This has significantly improved conditions to develop pelagic fishing in Greenlandic waters, and has already had a positive impact in 2021.
Financial reserves
Despite the negative performance, our financial reserves were not challenged, due in part to a careful development of our working capital. The additional credit facilities totalling DKK 700 million that were negotiated with credit institutions in early 2020 have not been utilised.
The situation is being monitored closely, and we are taking all of the measures necessary to minimise the effect of the pandemic, so that Royal Greenland A/S can weather this crisis successfully.
Royal Greenland A/S will hold its annual general meeting on Wednesday, 20 May 2021 at the head office in Nuuk.
For further information please contact CEO Mikael Thinghuus on mobile + 45 50 89 30 00.
