Royal Greenland's earnings affected by volatile market conditions

14.09.2023

Royal Greenland’s interim result for the period 1 January to 30 June 2023 shows a profit before tax of DKK (113) million compared to DKK 96 million for the same period last year. This can only be described as unsatisfactory.

However, the expectation for the whole financial year is to continue to achieve a positive result before tax of at least DKK 100 million.

Several product categories are severely affected by external market conditions

Royal Greenland’s largest product categories measured in volume are prawns. The prawn categories alone mean a profit deviation of DKK (160) million. With the boycott of Russia, approximately 1,000 tonnes of shell-on prawns for this market have disappeared. At the same time, earnings in Norway and Sweden have been under pressure due to low exchange rates. On the other hand, the Chinese market has brought good demand for shell-on prawns.

The cooked & peeled prawns product category has affected the most by the economic slowdown in Europe and by Brexit in the UK. In regard to the latter there are still long prospects for a free trade agreement with Greenland.

The boycott of Russia also plays into sales patterns and price formation for snow crab. As a result of the western world’s boycott, Russia is exporting more crabs to Asia, which is putting pressure on Royal Greenland’s opportunities to achieve good prices in Japan.

2022 was a difficult year for Royal Greenland’s snow crab category, with the collapse of the North American market leading to a large build-up of stock. The stock is now almost sold, and 2023 production shows a normalised sales pattern and earnings. However, the crab season in Newfoundland has been delayed due to a conflict between fishermen and producers, meaning that one month’s sales have been postponed to the second half of the year. The category will thus regain its position as a strong part of Royal Greenland’s business.

Significant cost increases

The extreme inflation and energy crisis at the start of the year resulted in Royal Greenland’s direct costs being DKK 240 million higher for the period than during the same period last year. It has only been possible to compensate for these with sales price increases in the region of DKK 130 million.

Debt will be reduced in the second half of the year and the outlook is significantly more positive

Interest-bearing debt increased by DKK 344 million, primarily as a result of investments. Despite the difficult market conditions and general cost increases, it is crucial that we implement planned investments of renewing the offshore trawler fleet to the benefit of Royal Greenland in many years to come. In the second half of the year, debt is expected to be reduced by DKK 0.6 billion.

Royal Greenland’s peak season is in the second half of the year. The Chinese market is expected to deliver significant demand for Greenland halibut in particular. Increased sales prices will compensate for low exchange rates in Scandinavia. At the same time, sales of snow crab have normalised and will deliver period-shifted sales in the second half of the year. Together with strict cost management and intensified sales of cooked & peeled prawns, among other categories, it is expected that sales and earnings in the second half of the year will be at the level of a normal year. A positive pre-tax result of at least DKK 100 million is expected for the year as a whole.

In the second half of the year, the company also looks forward to welcoming two new board members, Preben Sunke and Niels Thomsen – both strong business profiles who will strengthen both the Greenlandic and international profile of the Supervisory board.

CEO Susanne Arfelt Rajamand emphasises: 'Despite the volatile environment, significant employee efforts are being made across all functions of the company. Once again, our diversification strategy shows that, across markets and categories, we have a balance in the business that enables us to come out of the overall financial year satisfactorily'.