CEO's review - Annual report 2010
Over the last two years, Finnlines has gone through a comprehensive restructuring programme that has reached into every corner of the business. Starting in 2009 and continuing last year, we have focussed intensely on cost-cutting across the company. We have also optimised our organisation and production model, disposed of non-core assets, crafted synergies between our own improved liner connections and the massive liner network of the Grimaldi Group, introduced freight yield management on the cargo side, and dramatically upgraded our offering to the passenger market.
The results are there for all to see. These measures have allowed us to improve efficiency, cut costs, increase transparency, and introduce a series of new routes and new passenger initiatives. They have also powered a dramatic EUR 55 million improvement in EBT.
Looking back over 2010, it is plain now that this was the year that Finnlines recovered its somewhat precarious balance and began, with increasing confidence, to work its way through the storm battering its key markets.
After pushing through this plan of action, Finnlines is now ready for a new era of growth.
The passenger business is a case in point. It is not that we used to lack the ability to serve non-commercial passengers, or the assets: our prized Star-class vessels, for instance, have 200 cabins and capacity for 500 guests. For years, though, and despite an illustrious history in this segment, it seemed that Finnlines had simply not attended to its passenger vocation as it could have done.
Reviving it, by improving service, and by expanding our routes and marketing them aggressively, has transformed Finnlines’ passenger business into a profit centre in its own right that will only grow in the years ahead.
In other ways, too, this year has been about attack as much as defence. Helsinki is our home, and Finland the core of our business, as we proved once again through the year with the consolidation of three gateways to Helsinki in the southern Baltic via services through Travemünde, Rostock and Gdynia.
But just as we have been buttressing our traditional market, we have also moved into new territories, as often as not piggy-backing on the far-flung network of the Naples-based Grimaldi Group. Early in the year, we began connecting with sister company ACL in Gothenburg for voyages to the US East Coast. Grimaldi’s state-of-the-art Antwerp Euroterminal has also become a critical hub for us, with a string of Finnlines services now connecting through the Belgian port.
Among them are a number of enhancements to our Russia service through St. Petersburg, for which we have high hopes. In early summer, for instance, we announced a significant upgrade of our TransRussiaExpress service, increasing its capacity by adding a larger ship and expanding its reach with additional calls at Sassnitz and by adding Ventspils to the itinerary.
Separately, and around the same time, we announced the extension of our southern cargo service from Bilbao via Antwerp and Helsinki to St. Petersburg. This is not just about connecting St. Petersburg with these Western European ports. Through Antwerp, our clients in the Russian market will also be able to access the Mediterranean, West Africa and South America through the Grimaldi network.
We have also taken care to link the UK in to this main arterial route. In August, in a further expression of our faith in Russia’s trading future, we announced the launch of a new “Central Line” connecting Hull and Immingham via Antwerp to Helsinki and St. Petersburg.
As these new and improved services have become a reality, and the impact of our other cost-control and revenue-enhancement measures have begun to impact the bottom line, so our financial performance has also started to right itself.
This year, Finnlines’ performance trend-line has moved inexorably upward. By the second quarter we were announcing our first quarterly profit for almost two years. For the full year, earnings before tax were up to EUR 3.7 million, compared with a loss of EUR 51.4 million in 2009.
Revenues, meanwhile, came in at EUR 561.1 million, up from EUR 494.4 million in 2009, which only underlines how much more efficient we have become over the last year and how much fat has been cut out of the organisation. It also demonstrates just how little we have been helped by improvements in the general cargo market.
We believe this is but a prelude to better things. Though economic conditions – and particularly uncertain growth and concerns over sovereign debt issues – require us to be cautious, it appears that we are at least on the right track. And with six state-of-the-art new vessels due to arrive over the next two years, we will have a young, efficient and environmentally sustainable fleet with which to confront the future. That alone is reason for confidence as we look forward to a new year.
The measures that we initiated in 2009 and pressed home in 2010 will be the basis for our future success. We remain committed to keeping cost levels down, in order to provide a solid foundation for continued financial improvement. At the same time, we value our role as a service provider for the community around us and will continue to honour our pledge to provide a flexible, reliable service for all our customers.
I would like to thank our customers, our shareholders and our staff at sea and ashore for their contributions to making 2010 the success it was for Finnlines. I am very much looking forward to an exciting and challenging year ahead, and to another great leap forward in 2011.