Seafood company Royal Greenland has published its half-yearly results for 2023, showing a loss before tax of DKK 113 million (EUR 15.2 million/ US $16.2 million) in the first half of 2023.
The results "can only be described as unsatisfactory," Royal Greenland said in a written statement. During the same period last year, the company made a profit of DKK 96 million (EUR 12.9 million/US $13.7 million).
A cocktail of "external market conditions" are to blame for the 2023 H1 results, the company said, noting that Royal Greenland's earnings are "under pressure" from "rising oil prices, the energy crisis, inflation and economic slowdown in Europe", as well as Russia's invasion of Ukraine.
The boycott of Russian trade has particularly impacted sales of shell-on prawns, Royal Greenland noted. Prawns account for the Greenland-based seafood company's largest product categories by volume, and it is one of the world's largest suppliers of this category.
"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."
While the Chinese market shows a healthy demand for shell-on prawns, Royal Greenland said that their earnings for this category in Norway and Sweden "have been under pressure due to low exchange rates".
Meanwhile, in the cooked and peeled prawns category, the economic slowdown in Europe, together with Brexit, has also created problems for the company.
Royal Greenland's crab products were also impacted by the boycott on trade with Russia, with knock-on effects to prices and sales patterns in other markets. "Russia is exporting more crabs to Asia, which is putting pressure on Royal Greenland's opportunities to achieve good prices in Japan," the company said.
The collapse of the North American snow crab market during 2022 also posed a challenge, incurring a significant build-up of stock, the company noted. While this is now resolved, with the stock almost sold and 2023 production and sales "normalised", Royal Greenland says that a conflict between fishermen and producers in Newfoundland has postponed one month's worth of snow crab sales until later in the year. "The category will thus regain its position as a strong part of Royal Greenland's business," it said.
Costs spiralled at the start of the year, with inflation and energy crisis combining to cost the company DKK 240 million more than the same period in 2022. Royal Greenland said it had been unable to compensate for this entirely, but that it had increased sales prices by approximately DKK 130 million.
The company also amassed interest-bearing debt during the first half, with an increase of DKK 344 million, mainly due to 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," the company said.
Despite these issues, the company said it expected results to improve during the remainder of 2023, noting that "Royal Greenland's peak season is in the second half of the year".
Royal Greenland predicts earnings before tax of at least DKK 100 million, saying that the company has good turnover and a secure market position.
It foresees a combination of demand for hablitut in the Chinese market, improved sales of snow crab and increased sales prices compensating for low exchange rates in the Nordic markets. The company will also implement strict cost management and intsenfiy its sales in the cooked and peeled prawn category.
"Despite the volatile environment, significant employee efforts are being made across all functions of the company," said CEO Susanne Arfelt Rajamand.
"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," she added.
Royal Greenland is a vertically integrated company fully owned by the government of Greenland. It is one of the world's largest suppliers of cold-water prawns and Greenland halibut. The company's fishing activities are concentrated in the North Atlantic and Arctic Oceans, and it owns and operates more than 40 landing and processing facilities in Greenland, Canada and Europe. Its sales and distribution networks are set up in various locations throughout Europe, North America and Asia.