Royal Greenland's earnings affected by Covid-19
Operating profit for the first half of 2020 shows a loss of DKK 16 million, compared to an operating profit of DKK 87 million in 2019. The lower earnings are due to Covid-19's impact on the markets, as well as a constrained market for cooked & peeled prawns.
As a company that sells exclusively in the international markets, and with more than half of the company's sales going to food service and further processing by other food companies, Royal Greenland's results are affected significantly by Covid-19. Measured as the profit from ordinary activities before the sale of trawlers, the interim result has declined from DKK 87 million last year to DKK (16) million this year.
The first six months of 2019 included a profit of DKK 141 million from the sale of the Sisimiut and Qaqqatsiaq trawlers, while the current year includes a loss of DKK 15 million on the sale of a pelagic vessel. Including the sale of these trawlers, the profit before tax decreased from DKK 228 million to DKK (31) million.
Covid-19 and the markets
Revenue decreased by 9% compared to the previous year. While sales to the food service and industrial segments were affected severely during the first four months of the year, the gradual opening of the markets has meant that sales to food service and industry are now approaching last year's level.
The gradual reopening of economic activities during recent months, combined with the snow crab season in Atlantic Canada, brought a significant improvement in earnings.
Covid-19 has generally required a high degree of flexibility and adjustment in day-to-day business activities, not only regarding employee safety and the organization of workplaces, but also the sales processes. E-commerce activities were accelerated, particularly in China and Japan. The joint venture agreement with Beiyang Jiamei Seafood in China, which was entered into at the end of 2019, has already proved its worth.
Besides the Covid-19 situation, the market for cooked & peeled prawns was under pressure, particularly for large prawns. Since mid-2019, the market has been oversupplied, resulting in significant price drops.
Royal Greenland’s net profit for H1 amounts to DKK (39) million, compared to DKK 141 million for the same period last year.
Financial preparedness remains intact.
Despite lower sales and unchanged fisheries and production, we succeeded in keeping working capital at the same level, which is particularly satisfactory.
Interest-bearing debt increased by DKK 276 million, as a consequence of the construction of the new trawlers, Avataq and Nataarnaq, of which the latter will be delivered in the summer of 2021, while Avataq was delivered in December 2019.
The company has expanded it’s credit facilities with DKK 750 million to combat the uncertainties due to Covid-19, but has not drawn on these facilities. Available liquidity currently amounts to DKK 1.4 billion.
Equity amounts to DKK 1.7 billion, with an equity ratio of 31.4%.
The company's expected performance
As a consequence of Covid-19 and the performance of the market for cooked & peeled prawns, it is not possible to maintain the positive development seen in previous years.
In respect for the social consequences for the local communities, Royal Greenland has given priority to maintaining fisheries and production levels, and our employees have made outstanding efforts under difficult conditions. We hope that the market conditions will allow us to maintain this priority.
It is vital that Asia, and in particular the Chinese market, which is Royal Greenland's largest market, sees a degree of normalization in H2. In this respect, it is important to emphasize that our products come from Greenland, which is a Covid-19-free area.
We are continuously working with different scenarios and corrective measures.
Financial preparedness remains intact. The focus is on weathering the Covid-19 pandemic successfully.
Download Royal Greenland's 2020 interim report here
For further information, please contact CEO Mikael Thinghuus on mobile (+45) 50 89 30 00.