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Royal Greenland Posts Record Profit and Continued Growth in Sales of North Atlantic Seafood Products

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Royal Greenland, the Nuuk, Greenland-headquartered supplier of wild-caught fishery products harvested from North Atlantic and Arctic Ocean waters, generated a record profit before tax of DKK 404 million (approximately US $58.9 million) during 2019. The result was augmented by the sale of the two trawlers, which fetched DKK 141 ($20.6 million), but also reflects an ordinary operating profit that is the best in the history of the company.

In total, net revenue increased by approximately 3% to DKK 5.327 billion. Performance was challenged in the second half of the year, however, by lower sales prices received for large-size cooked and peeled prawns.

Investments in Catching and Processing

Major investments were made in 2019, including the procurement of two new trawlers. A third trawler dedicated to catching shrimp, now under construction, is due to be delivered in 2021. The company’s fleet operates in the rich fishing grounds between Greenland and Eastern Canada, east of Greenland and as far northeast as the Barents Sea.

In Newfoundland, Royal Greenland has established a factory for the production of live lobster. As a new company in the group, A&L Seafoods in Nova Scotia, has performed well. Most recently, Royal Greenland entered into a joint venture with a company in Chile to strengthen its crab activities.

The business development and group equity of DKK 1.7 billion, equivalent to an equity ratio of 31%, supports the company’s strategic focus and financial strength as it endeavors to be the world’s leading supplier of wild-caught North Atlantic seafood.

Core activities continued to develop positively, with combined sales of coldwater prawns, halibut and snow crab constituting a 77% share of Royal Greenland’s turnover compared to just 41% six years ago.

Shell-on prawns remain the best-earning product line. Sales in China and Scandinavia are developing positively, while results in the Russian market have been affected by greater self-sufficiency among domestic producers.

In the autumn of 2019, prawn packing and the production of shrimp in brine were relocated from Denmark to Cuxhaven, Germany. In addition, a large share of the packing of prawns for customers will be moved to Greenland, where 1,432 people are employed. The workforce in Denmark is 199 and 569 in other countries, totaling 2,200 company-wide.

Sales of Greenland halibut increased in 2019, with Asia accounting for 90% of receipts. The main markets are China and Japan.

The upgrading of production facilities in Northern Greenland (Uummannaq, Aappilattoq, Upernavik Kujalleq and Nuussuaq), and the establishment of joint ventures with fishermen and employees, strengthened the company’s position. However, earnings were not at the same level as in 2018 due to increased competition and higher costs.

Royal Greenland group companies Quin-Sea Fisheries and A&L Seafoods continued to enjoy strong exports of snow crab to Japan and the USA. Sales increased by 45% and earnings also rose, despite significantly higher raw material prices.

Losses were logged for North Atlantic cod, although progress is being made as a consequence of higher sales prices. Meanwhile, declining cod volumes in Greenland’s inshore waters are of concern, since stable high volumes are vital to the success of Royal Greenland’s Nutaaq project in Maniitsoq. Inshore volumes fell by 27% in 2019.

Lumpfish roe achieved positive earnings once again in 2019. France is the most important market for this item.

Sales of pelagic products logged considerable gains in 2019, despite the lacking allocation of a capelin quota and unusually poor mackerel catches in the fishing grounds of Eastern Greenland. On the other hand, early access to mackerel fishing in international waters improved earnings significantly.

Earnings for the flatfish range from partner A. Espersen, which took over Royal Greenland’s factory in Poland during 2017, also developed positively, with a significantly better match between sales and raw material prices.

Growth in Asia and North America

Business in Asia and North America continued to grow in 2019, and together accounted for 44% of turnover. Asia was the largest regional market, as European countries faced a number of challenges.

Sales to Asia amounted to DKK 1.8 billion, equivalent to 34% of turnover, compared to 23% five years ago.

Turnover grew by 13%. Despite difficult market conditions in China, due to trade conflicts between Washington and Beijing and the RMB exchange rate, growth of 18% was achieved in the PRC.

The main products for the Chinese market are shell-on prawns and Greenland halibut, but there is also significant demand for cod, snow crab and cooked and peeled prawns.

There has been solid demand for Greenland halibut in China, but with slightly falling sales prices up to the end of the year. The increase in shipments of shell-on prawns was particularly important, since it was necessary to find new destinations for the product to replace falling sales in Russian.

Exports to the Japanese market increased by 9%, and were related particularly to Greenland halibut. For the main species of shell-on prawns, halibut and snow crab, Royal Greenland is a market leader for deliveries to Japanese sushi chains. The products are sold both in Japan and internationally, as Japanese sushi chains expand outside the homeland. Sales to Taiwan, Singapore and Hong Kong in particular have been developing positively.

Work is ongoing to develop output in Thailand and Vietnam as a strong supplement to Chinese production.

Coronavirus Impact

The outlook for 2020 was for a continued positive business climate, but that was before the deadly novel coronavirus outbreak that originated in China late last year spread globally. The global health crisis has presented significant sales challenges, particularly for the foodservice and industrial segments. Results this year are expected to be negatively affected to a very considerable extent, although the impact cannot be quantified at the present time since it depends on a number of factors. Chief among them is the duration of the Covid-19 pandemic that by May 3 had been attributed to the deaths of more than 237,000 people and over 3,373,000 confirmed cases of infection worldwide.

As for 2019, exports to China topped DKK 1 billion, making it the company’s largest single market. Sales were driven primarily by halibut and shell-on prawns, while snow crab, lobster, cod and cooked and peeled prawns also found their way to tables in the PRC.

In December, prior to news of the Covid-19 outbreak in Wuhan, Royal Greenland signed an agreement with Beiyang Jiamei Seafood. Under terms of the deal, it has acquired 20% of the Qingdao-based company, which employs around 100 people and has extensive online platform trading expertise.

Meanwhile, digital sales in Japan have exceeded expectations, as the company opened a proprietary store on the Rakuten online platform. Business was particularly robust in the last months of 2019 and into the early part of the new year.