Improved earnings despite lower sales - Annual report 2018

The financial year 2018 demonstrates the strength of ‘The North Atlantic Champion’ strategy, where core activities are continuing to develop positively, both in terms of sales as well as earnings. Today, Royal Greenland’s core activities – Greenland halibut, shell-on prawns, cooked and peeled prawns as well as snow crab – account for 75% of the company’s revenue against only 41% five years ago.

Despite a decline in revenue of DKK 400 million, the strong demand for Royal Greenland’s products has made it possible to increase earnings. The decline in sales is due to non-acceptance of a low margin order for salmon portions to a European retail chain, as well as low catches of cod and pelagic fish. The year has also been impacted by a negative development in most of the company’s sales currencies, except of course the euro.

The profit before tax for the financial year is DKK 258 million, against DKK 253 million in 2017. The net profit after tax is DKK 126 million, against DKK 129 million in 2017.

Positive sales and earnings

Revenue has grown in Asia, North America and Scandinavia, while there has been a drop in revenue in Europe.

Sales to Asia have grown by 6%, and total DKK 1.5 billion, which corresponds to 30% of group revenue compared to 20% five years ago.

In particular, there has been a positive development in sales of shell-on prawns, which have increased by 75% relative to 2017, a development which has been important for the overall pricing of shell-on prawns. Sales of Greenland halibut have also seen positive growth with slightly rising prices.

“Asia has been our focus area in recent years, and we are now reaping the fruits of our growth strategy in the region. More and more consumers are seeing increases in their disposable income. The people of China eat more fish and shellfish each year than Europeans and Americans combined, and since the demand for our products is increasing in Asia, we have been launching the sale of new species such as snow crab and cod,” says CEO Mikael Thinghuus.

Royal Greenland is the market leader in supplying Japanese sushi chains, which sell their products both in Japan and internationally.

Revenue in Scandinavia accounts for 24% of total group revenue of DKK 1.2 billion, and the Scandinavian market is particularly important as regards sales of prawn, cod, smoked products and a range of flat fish. Overall, there has been growth, with increased growth in Norway and Denmark, while Sweden has been challenged.

Europe is Royal Greenland’s largest sales market, and accounts for 37% of group revenue with total sales of DKK 1.9 billion. Revenue has declined significantly compared to 2017 as a result of the challenges on the Russian market and the opt-out of a salmon portions order in the German market. The European market comprises Germany, France, the UK, Italy, Spain, Portugal and Russia.

There has been a significant increase of 27% in sales to the North American market compared to 2017. Sales here total DKK 0.4 billion, and account for 8% of group revenue. The increase stems from the fact that the price of snow crabs has been higher on the American market than on the Japanese market. The product range on the North American market comprises snow crab, cod, Greenland halibut and prawns.

“As part of the development plan for the US market, at the end of 2018 we recruited a sales manager in the USA, and in 2019 we will establish a proper subsidiary, which will be able to import and sell to the market,” says Mikael Thinghuus.

North Atlantic cod has continued to entail losses for Royal Greenland. Decreasing inshore cod volumes in Greenland are a challenge, while the investments in the Nutaaq project in Maniitsoq are being maintained in order to increase the ratio of high-quality products and thereby the economics.   

It is recommended that DKK 63 million is paid out as dividend, which corresponds to 50% of net profit after tax. Tax recognised in Greenland including associated companies totals DKK 139 million, while the increase in fisheries taxes totalled DKK 187 million. In direct financial payments, Royal Greenland contributed DKK 2.2 billion in 2018 to the Greenlandic economy.

Royal Greenland employed 2.228 persons (full time equivalent) in 2018, of which 2/3 are in Greenland. The number of employees in Greenland has over the last five years grown with 50 %, and total 1.487 employees.

One of the two new trawlers is expected to be ready in May 2019, while the second is expected to be delivered later in the year in November. There is also a plan to replace the prawn trawler Nataarnaq, with delivery in 2021. The new trawlers will strengthen Royal Greenland’s primary fishing activities.

Outlook

The outlook for 2019 is basically a continuation of the positive trend which the company has been seeing this decade.

The North Atlantic species will continue to constitute a major proportion of the total business, and thereby boost earnings in accordance with ‘The North Atlantic Champion’.

Developments in the world economy, in particular Brexit and a possible trade war between the USA and China or between the USA and Europe, are key uncertainties.

Apart from Brexit and trade wars, the principal risk factors are the development in sales prices, including the development in exchange rates, the development in quotas for prawns and snow crab in Newfoundland, and the competitive situation for Greenland halibut in Greenland, which is relevant for both raw fish prices and volumes.

For further information, please contact CEO Mikael Thinghuus on tel. no. +45 50 89 30 00 (mobile).