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Royal Greenland Earnings Hit by Coronavirus Economic Upheaval

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Royal Greenland posted a loss of DKK 16 million during the first half of 2020 , compared to an operating profit of DKK 87 million in 2019. The lower earnings were attributed to the impact of the novel coronavirus (SARS-CoV-19) impact on seafood markets, as well as a constrained demand for cooked and peeled prawns. 

As the Nuuk, Greenland-headquartered vertically integrated company sells exclusively to customers in international markets, and with more than half of the its sales generally going to foodservice and further processing sectors, Royal Greenland’s results are affected significantly by fallout from Covid-19 respiratory disease. Measured as the profit from ordinary activities before the sale of trawlers, sustained a serious hit.

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 foodservice 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 foodservice 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.

The Covid-19 health crisis 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 negative impact from Covid-19, the market for cooked and 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, the company succeeded in keeping working capital at the same level, which is viewed as 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.

Royal Greenland has expanded its 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%.

“As a consequence of Covid-19 and the performance of the market for cooked and peeled prawns, it is not possible to maintain the positive development seen in previous years,” stated the company in a press release.

In respect for the social consequences for the local communities, Royal Greenland has given priority to maintaining fisheries and production levels at its network of processing plants, and applauds employees who have made “outstanding efforts” under difficult conditions.

“We hope that the market conditions will allow us to maintain this priority,” stated the company. “It is vital that Asia, and in particular the Chinese market, which is our 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.”